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Manufacturing shipments down for second straight month

OTTAWA, Ont. -- Manufacturing shipments fell 0.8% to $42.4 billion, the second straight monthly drop, Statistics Ca...

OTTAWA, Ont. — Manufacturing shipments fell 0.8% to $42.4 billion, the second straight monthly drop, Statistics Canada reports.

In April, shipments fell a sharp 3.4%.
Thirteen of the 21 industries tracked by Statistics Canada, accounting for almost three-quarters of total shipments, reported decreases in May.

The primary metals industry was the principal contributor to the lower shipments in May. Shipments declined 3.5% to $2.6 billion. Falling US demand for primary metals, coupled with lower industrial prices in several sectors of the industry, had a negative impact on shipments in recent months.

Shipments of petroleum and coal products eased back 2.3% to $2.9 billion, following April’s steep 18.8% drop. As the war in Iraq drew to a close, prices of petroleum and coal products tumbled almost 18% since their apex of April. In addition to the price effects, several refineries have slowed production in recent months for maintenance purposes.

The food industry also contributed to lower shipments in May, reporting a 1.2% drop to $5.3 billion. As noted above, a slowdown in the meat products industry due to the export ban on beef, was mostly responsible for the decline.
The drop in shipments is a result of several obstacles facing the Canadian economy. The war in Iraq contributed to soaring petroleum prices and, consequently, to record high shipment levels. April’s outbreak of the severe acute respiratory syndrome (SARS), followed by a second wave in May also hurt the economy. And, of course, the detection of bovine spongiform encephalopathy (BSE), or mad cow disease, in Alberta has resulted in the closure of foreign borders to the export of Canadian beef products and continues to plague the meat products industry.

“The Business Conditions Survey reported that 31% of manufacturers would decrease production in the second quarter, because of concerns with lower levels of new and unfilled orders. Coupled with the appreciating value of the Canadian dollar and the ongoing weak state of the US economy, these factors will continue to test the strength of the Canadian manufacturers and the economy as a whole in the months to come,” Statistics Canada notes in its Daily Bulletin.

Taking a regional look at shipment volumes, seven provinces and the territories reported lower shipments.
Widespread decreases in Quebec’s manufacturing sector contributed to a $158 million (-1.6%) decrease to $9.7 billion, the lowest level of shipments since December 2001. The primary metals and petroleum industries were the main contributors to the decline.

Shipments in Alberta fell by $71 million (-2.0%) to $3.5 billion, the second decrease in a row. Following a strong first quarter, Alberta’s manufacturing sector has been hit hard by April’s steep decline in petroleum prices, as well as by the current problem of mad cow disease, which has shut down Canada’s export market for beef products. Lower shipments of food, primarily due to the export ban, was the main contributor to Alberta’s overall decline in shipments for May.

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