Canadian business inventories on the rise

Following three months of relative stability, the value of inventories grew 0.8% in May to $65.7 billion, the highest level since November 2000, Statistics Canada reports.

The growth was led by a 1.8% rise in goods-in-process inventories. Unfilled orders, boosted by increases in the aerospace product and parts industry, were up 1.0%.

Total inventories approached the peak of $65.8 billion registered in November 2000. In recent months, manufacturers had adjusted their production levels to curb the expansion of finished product inventories. Goods-in-process inventories rose 1.8%, and were coupled with increases in raw material (+0.6%) and finished product (+0.3%) inventories.

The aerospace product and parts industry reported a 2.4% increase to $7.7 billion; its inventories have been rising throughout 2001.

Since peaking last November at $6.9 billion, manufacturers in the computer and electronic products industry have been gradually drawing down their inventories. Consequently, manufacturers had lowered their production by 25% over the previous five months. Despite the cuts, May inventories in this industry actually climbed for the first time in three months, up 2.6% to $6.3 billion. Also increasing in May were inventories of petroleum and coal product manufacturers, up 8.4% to 2.0 billion.

Small decreases were reported by the fabricated metal products industry (-2.3%), and the primary metal industry (-1.4%).

The inventory/shipment ratio was 1.47 in May, continuing to slip from its peak of 1.52 in February. The trend, which had been consistently climbing since the autumn of 1999, remained unchanged for the second month in a row. Meanwhile, the finished product inventory/shipment ratio fell to 0.45, the second decline in three months. Prior to this, the ratio had been progressively increasing since early 2000.