Uncertainty dogs outlook for second quarter (April 30, 2004)

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OTTAWA, Ont. — Freight volumes for the spring months remain a question mark. Uncertainty seems to best describe manufacturers’ confidence regarding the outlook for the second quarter of 2004, the latest survey of manufacturers indicates.

Although remaining positive, production prospects for the coming quarter were slightly lower and satisfaction with the current level of unfilled orders was less negative, according to the quarterly survey of about 4,000 manufacturers conducted by Statistics Canada. However, manufacturers indicated more concern with lower levels of new orders and rising levels of finished product inventories.

Producers in the primary metals, fabricated metal products and machinery industries expressed major concerns about steel shortages, higher prices and increasing exports of scrap metal to China.

In April, 23% of manufacturers stated they would increase production in the second quarter of 2004, while 15% expected to decrease production. Sixteen of the 21 manufacturing industries continued to contribute to the positive balance.

Of particular concern in the growth in the number of manufacturers who stated that orders received were decreasing – 22% said so in April compared to 11% in January. Producers in the computer and electronic products and transportation equipment industries were the major contributors to the negative balance.

In April, 73% of manufacturers reported that the current level of finished product inventories was about right, an 11 percentage point drop from January’s survey. Some 17% stated that inventories were too high and 10% said inventories were too low. Yet as of February finished-product inventories stood at $20.1 billion, their lowest level since September 2002 and the 10th decrease in a row.

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