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Manufacturers preparing to decrease production in second quarter

OTTAWA, Ont. -- Truck freight volumes could dip in the second quarter as manufacturers concerned with lower levels...


OTTAWA, Ont. — Truck freight volumes could dip in the second quarter as manufacturers concerned with lower levels of new and unfilled orders prepare to decrease production levels.

The growing pessimistic mood among manufacturers was noted in Statistics Canada’s quarterly Business Conditions Survey, published today. Almost 4,000 responded to the voluntary survey, which requests manufacturers’ opinions on production impediments, finished product inventory levels, new and unfilled order levels, production and employment prospects in the coming three months.

Key factors influencing the manufacturers’ intentions this quarter include global uncertainty and the appreciation of the Canadian dollar which makes exports to the U.S. market less appealing.

In April, 31% of manufacturers stated they would decrease production in the second quarter, while only 19% expected to increase production, leaving the balance of opinion at -12. In addition, 12 of the 21 major industry groupings, representing 60% of manufacturing shipments, indicated a negative outlook for the second quarter of 2003.

Producers in the transportation equipment, computer and electronic product and primary metal industries were the major contributors to the 21-point drop in the balance of opinion from January. This is the largest balance decrease since a 31-point drop in January 2001.

The balance of opinion is determined by subtracting the proportion of manufacturers that stated production would decrease in the coming three months from the proportion who stated production would be increasing.

More than a quarter of manufacturers (26%) responding to Statistics Canada’s quarterly Business Conditions Survey said their level of unfilled orders was lower than normal and only 7% said it was higher than normal.

Of the 21 major industry groupings, 18 said unfilled order levels were lower, led by the transportation equipment, computer and electronic product, primary metals and fabricated metal product industries.

Orders received is also becoming a concern. The number of manufacturers who stated that orders were declining went from 14% in January to 26% in April. Again, producers in the transportation equipment, computer and electronic product, primary metals and fabricated metal product industries were the major contributors to the drop in the balance.

Sixteen percent of manufacturers felt their inventories were too high, while 3% said inventories were too low.


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