Manufacturers’ inventories continue to accumulate

Manufacturers’ inventories rose 0.4% to $63.4 billion in December, Statistics Canada reports. Inventories have been gradually accumulating since July, and are now at a 15-month high.

December’s increase was concentrated in raw materials inventories, which jumped 0.9% to $27.6 billion. Finished-product inventories edged up 0.1% to $19.7 billion. Although the increase was negligible, it was the fifth consecutive rise for finished products; this may be a sign of slowing demand. December’s finished-product inventories were up 4.9% from July’s recent low of $18.8 billion.

Inventories of petroleum and coal products soared 8.2% to $1.6 billion in December, as manufacturers worked on replenishing depleted stocks. The motor vehicles (+4.4%) and the motor vehicle parts (+3.9%) industries also reported higher inventories in December.

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.

Rising inventories and lower orders were in line with the guarded mood of manufacturers, as seen in January’s quarterly Business Conditions Survey. Although opinions on production prospects improved slightly, many producers indicated lower satisfaction with the levels of new and unfilled orders for the first quarter of 2003. Orders have been trending down throughout the fall of 2002.

South of the border, US manufacturing inventories rose 0.5% in December, partly the result of a 1.0% increase in stocks of durable goods. This was the first rise in durable goods inventories since January 2001.