Canadian Manufacturer Optimism Wanes

Canadian manufacturers' optimism in the last two quarters waned as they looked ahead to the final three months of  ; 2007. According to the October Business Conditions Survey by Statistics Canada, manufacturers indicated heightened dissatisfaction with the level of orders received, while production prospects weakened.


Although they remained positive in the fourth quarter of  ; 2007, manufacturers were more guarded as they continued to face important labor shortages, coupled with ongoing pressures caused by the Canadian dollar reaching parity with the U.S. greenback.

Manufacturers' outlook on production prospects weakens
In October, the proportion of manufacturers stating they would increase production over the next three months stood at  ; 25%, up  ; 3  ; points from July. This was largely offset by  ; 23% of manufacturers stating they would decrease production, which was up from  ; 15% in July. As a result, the balance of opinion stood at +2, a decrease of  ; 5  ; points from the previous survey.

Although lower, this was the third consecutive positive balance in  ; 2007. Continuing positive production prospects were posted in Newfoundland and Labrador, Prince Edward Island, Nova Scotia, Ontario, Manitoba and Saskatchewan, while opinions in the remaining provinces were negative.

Producers in transportation equipment, machinery and electric equipment, appliance and components industries were the major contributors to the positive balance. In all,  ; 10  ; of the  ; 21  ; manufacturing industries posted a positive balance for production prospects in the fourth quarter of  ; 2007.
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The balance of opinion was determined by subtracting the proportion of manufacturers who expected production would be decreasing in the coming three months from the proportion who expected production would be increasing.
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Satisfaction with level of new orders down
In October, the balance of opinion concerning current levels of new orders dropped  ; 9  ; points from the July survey to -3. The proportion of manufacturers who stated that orders received were declining edged up  ; 3  ; points to  ; 22% in October. In contrast, those stating new orders were rising fell  ; 6  ; points to  ; 19% in October.
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Although negative, the balance of opinion remains higher than the -13  ; posted one year earlier in the October  ; 2006  ; survey. Producers in primary metal, paper, wood, and computer and electronics products industries were the major contributors to the lowered balance of opinion for orders received. According to August's Monthly Survey of Manufacturing, new orders for all manufacturing industries dropped  ; 5.0% from July to just under  ; $51.2  ; billion.

Manufacturers less satisfied with levels of unfilled orders
In October,  ; 76% of manufacturers described the backlog of unfilled orders as normal, a  ; 6  ; point increase from July. The October balance of opinion declined an additional  ; 4  ; points to -9, largely due to a smaller proportion of manufacturers (8%) indicating that the current level of unfilled orders was higher than normal.
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Meanwhile,  ; 17% reported a lower than normal backlog, comparable to the previous two quarters. Producers in the wood and paper industries were the major contributors to the negative unfilled orders balance of opinion. With the exception of the April survey, the balance of opinion for unfilled orders has been negative since October  ; 2004, reaching a low of -23  ; in April  ; 2005.
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According to August's Monthly Survey of Manufacturing, unfilled orders posted a slight decrease of  ; 0.1% to almost  ; $54.9  ; billion, the first decline in  ; 12  ; months. Currently, the backlog of

orders stands  ; $13.6  ; billion higher than that of the same month one year ago.
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Manufacturers slightly less concerned with finished product inventories
In October,  ; 83% of manufacturers reported that the current level of finished product inventories was about right, up  ; 3  ; points from July. Some  ; 13% stated that inventories were too high, while  ; 4% said inventories were too low. This left the balance of opinion at -9, a  ; 2  ; point improvement from the July balance. According to August's Monthly Survey of Manufacturing, finished product inventories stood at over  ; $22.4  ; billion, down  ; 1.4% from the almost  ; $22.8  ; billion posted one year earlier in the August  ; 2006  ; survey.
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Manufacturers' employment prospects remain unchanged
The October balance of opinion for employment prospects for the next three months remained unchanged from the July survey at +1. Some  ; 64% of manufacturers stated that they would keep their current workforce,  ; 18% indicated they would increase it, and  ; 17% indicated that they expected to decrease employment in the fourth quarter of  ; 2007.
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Regionally, negative balances in Quebec (-2) and Ontario (-9) were offset by positive balances in the remaining provinces, where many manufacturers continued to experience difficulty in finding skilled labor. According to the September Labour Force Survey, over the first nine months of  ; 2007, manufacturing employment declined  ; 3.7% to just under  ; 2.04  ; million.
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More manufacturers frustrated by production impediments
The proportion of manufacturers reporting production impediments jumped  ; 8  ; points to  ; 36% in the October survey. The main concerns cited were labor shortages, and the high value of the Canadian dollar.
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Most of the increase in concern related to skilled labor shortage, which jumped to  ; 16% in October from  ; 11% in July. Manufacturers in Manitoba (42%), Saskatchewan (58%) and Alberta (48%) continued to express the greatest concerns regarding skilled labor shortages.

The Business Conditions Survey is a quarterly survey of Canadian manufacturers that requests manufacturers' opinions on production impediments, finished product inventory levels, new and unfilled order levels, and production and employment prospects in the coming three months. This voluntary survey was conducted in the first two weeks of October and attracted more than  ; 3,000  ; responses from manufacturers.

Source: Statistics Canada" 11/8/2007 8 October survey: Suppliers are more guarded going into final months of 2007. 1 4627 Eaton Buys Arrow Hose & Tubing breaking-news 11/8/2007 /breaking-news/4627-1.html Diversified industrial manufacturer Eaton Corp., Cleveland, OH, has acquired Arrow Hose & Tubing Inc., a manufacturer of specialty thermoplastic hose and tubing for the industrial, food and beverage, and agricultural markets.
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The business had 2006 sales of $12 million. The business employs 60 people and is headquartered in Guelph, Ontario.
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"The acquisition of Arrow Hose & Tubing Inc. complements Eaton's thermoplastic hose and tubing product line, increases the company's offering to the food and beverage industry, and strengthens our presence in the agriculture markets," said Craig Arnold, Eaton senior vice president and president - Fluid Power Group.
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Eaton had 2006 sales of $12.4 billion.