More than a third of manufacturers expect to slash output

Manufacturers were increasingly concerned about the pace of their production and the prospects for employment in the fourth quarter, according to Statistics Canada’s October Quarterly Business Conditions Survey.

The voluntary survey, to which almost 4,000 responded, showed that more than one-third (34%)of manufacturers expected to reduce output during the next three months, more than double the proportion of 16% in October 2000. And almost one-quarter expected that their work force would decline.

Producers in the transportation equipment and primary metals industries were the major contributors to these lowered expectations. At the same time, about 58% of manufacturers reported their output would be about the same, compared with about 55% in July and 65% a year ago.

However some respondents said they were finding it extremely difficult to assess their economic prospects for the fourth quarter. Many specifically mentioned the uncertainty caused by the September 11 terrorist attacks on New York and Washington, as well as the current economic slowdown.

The survey questionnaire was mailed in late September, and responses were collected during the first two weeks of October.

Only 8% of manufacturers remained positive about the prospects of increasing production for the coming quarter, the lowest level of positive responses since the survey began in 1981. This proportion is less than half the 17% recorded in July and 19% in October 2000.

Similarly, only 9% of manufacturers said they planned to increase employment levels in the next three months, slightly less than 11% in July and almost one-half of the level of 17% in October 2000.

However, four of five manufacturers considered their level of finished product inventory on hand was just about right. Only about 20% said their inventory was too high, down from 28% in July.

The Business Conditions Survey is conducted in January, April, July and October; most of the responses are recorded in the first two weeks of these months. Results are based on replies from about 4,000 manufacturers, and are weighted by a manufacturer’s shipments or employment

The balance of opinion for production prospects declined sharply to -26 in October, compared with -11 in July and +3 in October 2000.

The balance of opinion is determined by subtracting the proportion of manufacturers that stated their volume of production would likely be lower from the proportion who said their output would likely be higher.