Manufacturing shipments post third consecutive monthly increase

Manufacturing shipments advanced 1.2% from August to $44.5 billion, the third consecutive increase, and likely contributing to a perceived shortage of road transportation capacity that could drive up trucking rates.

This result was somewhat dampened by higher finished-product inventories and a decrease in unfilled orders, however, Statistics Canada reports.

"Following the economic slowdown of 2001, Canada’s manufacturing sector fared reasonably well from January to September. Year-to-date shipments were up 0.6% from the same period of 2001. The trend in shipments also remained positive throughout 2002," Statistics Canada comments today in its Daily Bulletin.

Many shippers and freight forwarders were reporting May, June and July that capacity in the trucking industry, which suffered the loss of about 2,000 small carriers following the rise in diesel prices in 2000 and the slowdown in the economy, was not able to keep up with the increase in shipments services. The September increase in shipments indicates this trend is continuing.

In September, 12 of the 21 major manufacturing industries, representing almost 77% of total shipments, posted increases. On a provincial basis, shipments were up in seven provinces. Ontario led the provinces with a 1.6% rise in dollar value shipped compared with August. Also up strongly in September were Alberta (+4.1%) and Quebec (+1.0%).

"With the arrival of autumn, consumer spending continued to sustain several sectors of the economy. Favourably low interest rates and a relatively strong job market in Canada fed consumers’ voracious demand for houses and automobiles. The durable, big-ticket goods industries led the rise in shipments with a 1.8% increase, up for the third straight month. Manufacturers of non-durable goods reported a modest 0.3% increase in shipments in September," Statistics Canada says.

Following a 3.7% drop in August, makers of motor vehicles and heavy trucks made up most of the ground lost, as shipments rebounded 3.5% to $6.0 billion in September.

Consumer demand for motor vehicles has remained quite impressive in Canada, and to a lesser extent in the United States, following an outstanding summer. Near-record low interest rates and financing incentives on 2002 and 2003 models continued to drive auto sales. Year-to-date levels were up 7.1% from the same period of 2001.

In addition, manufacturers of heavy trucks reaped the benefits of strong demand. This was primarily due to a surge in truck orders in anticipation of improved emission control standards on diesel engines, to be implemented October 1. To avoid possible price hikes for the new engines, some users of heavy trucks ordered vehicles in advance of the enhanced policies.

Manufacturers of computer and electronic products boosted shipments by 10.8% to $1.9 billion in September, improving on last month’s 7.6% drop, and making up lost ground after rather lethargic production over the summer. Despite this month’s increase, shipments remain well below previous years. Year-to-date shipments for 2002 were 20.1% below the same period of 2001, and remain at levels not seen since the mid-1990s.

Decreases in the motor vehicle parts industry and the wood products industry partly offset the shipment gains of the month. Motor vehicle parts manufacturers reported the first decline in output (-3.1%) since May.

Lower prices and shipping delays pulled down the value of wood products shipped by 2.6% to $2.4 billion in September. This was the first decrease since the sharp downturn last spring, the result of May’s reinstatement of US tariffs on Canadian softwood lumber exports. Shipment levels made notable gains in July and August, partly the result of solid demand for new housing.