Canadian manufacturers more upbeat about fourth quarter prospects

by Canadian Shipper

OTTAWA, Ont. Canadian manufacturers are becoming more optimistic about their prospects for the final quarter of 2005, according to Statistics Canada’s quarterly Business Conditions Survey, a sign future shipment volumes will remain steady.

Based on increases in new orders, a higher backlog of unfilled orders and a decline in finished product inventories, manufacturers were slightly more bullish about production prospects for the last quarter of 2005, the government statistical agency reported in its Daily Bulletin.

The voluntary survey conducted in the first two weeks of October, to which almost 4,000 manufacturers responded, requests opinions on production impediments, finished product inventory levels, new and unfilled order levels, and production and employment prospects in the coming three months.

In October, 17% of manufacturers stated they would increase production in the fourth quarter while 15% expected to decrease production. This was the first positive balance for production prospects since October 2004.

Preliminary data from our own Transportation Media Research on shipment trends shows the majority of Canadian shippers anticipate to increase their shipment volumes for 2006.

Led by producers in the transportation equipment, computer and electronic products and primary metal industries, 9 of the 21 manufacturing industries contributed to the more positive balance in production prospects. A lack of capacity continued to be an issue for some manufacturers. According to the Industrial Capacity Utilization Rates, manufacturers operated at a near record 86.7% of capacity in the second quarter of 2005.

The number of manufacturers who stated that orders received were declining was just 10% in October, a significant improvement from 22% in July, Statistics Canada reports. Producers in the transportation equipment, electric equipment, fabricated metal products and computer and electronic products industries were the major contributors to the improved balance of opinion for orders received. According to August’s Monthly Survey of Manufacturing, new orders for all manufacturing industries jumped 3.4% to just under $52.7 billion, the third increase in the last four months.

With 20% of manufacturers expressing a lower-than-normal backlog and 20% stating a higher-than-normal backlog, the balance of opinion concerning the current level of unfilled orders was at a standstill. But this was still an improvement from the July survey results. Producers in the primary metals, fabricated metal products, and plastics and rubber products industries were the major contributors to the improvement in the unfilled orders balance of opinion. According to August’s Monthly Survey of Manufacturing, unfilled orders picked up 1.9% to $42.2 billion the sixth consecutive increase.

There were also fewer manufacturers satisfied they had enough inventory on hand to handle current and future demand, another welcomed sign for future shipment volumes.

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