Manufacturing shipments, a strong indicator of motor carriers’ improving business for much of 2002,closed the year with a third consecutive decline and a nine-month low.

Statistics Canada reports that a sharp decline in the motor vehicle and parts industries was behind the decrease of shipments by 0.9% to $43.0 billion in December.

"December’s decline was highly concentrated in the transportation equipment sector. Excluding the motor vehicles and parts industries, manufacturing shipments advanced a solid 1.3%," the federal agency reported in its Daily Bulletin.

Only 9 of the 21 manufacturing industries representing 43% of total shipments reported decreases in December.

Only three provinces and the territories reported lower shipments in December, although the sharp reduction in
Ontario’s motor vehicle and parts industries dominated at the national level. Shipments in Ontario fell $701.6 million (-3.0%), by far the largest drop among the provinces. Nova Scotia and Newfoundland and Labrador also edged down in December.

New Brunswick and Quebec led the majority of provinces that reported stronger shipments in December.

The inventory-to-shipment ratio rose to 1.47 in December, up from 1.45 in November. Mounting inventories and a sharp decline in shipments boosted the inventory-to-shipment ratio to the highest level since March. Before the recent run up, the ratio had remained relatively stable since April, as manufacturers controlled their inventory levels and shipments grew moderately.

The finished-products inventory-to-shipment ratio continued to edge up in December, rising to 0.46 from 0.45 in November, the highest level since March. The ratio is a measure of the time that would be required in order to exhaust finished-product inventories if shipments were to remain at their current level.

The news was similarly negative on the other side of the border. Shipments in the United States fell back 0.6% in December, following a 1.1% drop in November. As in Canada, the transportation equipment sector was responsible for the decline.

Despite a strong start to 2002, the motor vehicle industry did not end the year on a positive note. Shipments plunged 11.1% to $4.7 billion in December, the fifth consecutive decline. In addition to the usual seasonal shutdowns at various assembly plants, some manufacturers extended plant closures by a few weeks, in an effort to reduce inventories.

Throughout 2002, low interest rates and attractive financing incentives contributed to strong consumer demand for new motor vehicles in North America. Uncertainty regarding the sustainability of that demand in the new year contributed to the slowdown of the motor vehicle manufacturing in the fourth quarter of 2002.

Concerns with rising inventory levels and the recent slowdown in motor vehicle manufacturing contributed to a 9.8% drop in shipments of motor vehicle parts in December. Shipments fell to $2.5 billion, the third decline in four months and the largest monthly decrease in shipments in two years.

Another negative note: finished-product inventories edged up 0.1%, marking the fifth consecutive rise. This also represented the longest string of monthly increases in finished-product inventories since the previous build-up of stocks in 2000.

Unfilled orders and new orders were also down in December, contributing to a weak fourth quarter.