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Trends
Jayson Myers
Manufacturing shipments
The value of goods produced and shipped by Canadian manufacturers fell 1.5% in April to an annualized $607.4 billion. Shipments have declined 2.2% since their peak in August 2005.
Dollar and productivity
The Canadian dollar has increased in value by just under 50% against the US dollar since the beginning of 2002. The higher dollar has exerted strong downward pressure on selling prices and, together with escalating business costs, has resulted in a severe squeeze on profit margins across Canada’s export-intensive manufacturing sector. In response, manufacturing productivity increased by 5.7% last year.
Work in progress
Higher productivity in Canadian manufacturing does not translate into greater competitiveness. Productivity is increasing as less productive product lines and companies go out of business. When other measures of efficiency improvement are taken into account, they suggest manufacturers have become less competitive since 2004, when the dollar crossed the US$0.80 level. For instance, work-in-progress has been rising as a percentage of total shipments value over the past two years.
Raw materials inventory
Raw materials inventories have remained fairly stable at around 55% of sales across the sector.
Final goods inventory
Final goods inventories are running at around 128% of shipments value, but have increased slightly since early 2004.
Consumer price inflation
In May 2006, consumer price inflation was running at 2.8%—the upper end of the Bank of Canada’s 1% to 3% target range. When more volatile prices like energy, food and mortgage rates are excluded, there appears to be little upward pressure on consumer prices. Core inflation increased to 2% in May, but has been trending between 1.4% and 2% for the past three years.
Trends information is provided by Plant, Canada’s Industrial Newspaper. Source: Jayson Myers, chief economist with Canadian Manufacturers & Exporters. Purchasing b2b and Plant are both published by Rogers Media.
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