Canadian Manufacturing Sales Decline in May

Canadian manufacturing sales fell 6.0% to $38.4 billion in May, the lowest level since November 1998. Manufacturing sales leveled off between February and April, after falling by 18.7% between October 2008 and January 2009. Plant shutdowns in the motor vehicle and primary metal industries, along with continued volatility in the aerospace industry, accounted for most of the decline in May.

Constant dollar manufacturing sales fell 5.8% in May, indicating that lower volumes rather than price changes were behind the decrease in sales. Sales in 17 of 21 manufacturing industries decreased in May, accounting for about three-quarters of total sales.

By Sector
The transportation equipment industry led the declines, falling 25.7% compared with April. Excluding the transportation equipment industry, total Canadian manufacturing sales decreased 2.1%. Motor vehicle manufacturing sales dropped 25.4% on the back of several plant shutdowns. Motor vehicle parts manufacturing fell 22.2%, reflecting a decrease in demand from vehicle assembly plants.

Production in the aerospace industry decreased by $781 million, reversing a similar sized increase in April. The aerospace products and parts industry has been extremely volatile over the past several months. Primary metal manufacturers reported a 9.0% decrease in sales for May, a reflection of plant shutdowns, lower prices and weak market demand.

Miscellaneous manufacturers (-13.7%), machinery manufacturers (-6.0%), fabricated metal products (-3.5%), and food (-2.9%) were other industries with large sales decreases during May.

The petroleum and coal products industry was the main offsetting industry as sales rose 6.2%. This reflected higher prices (+5.0% as measured by the Industrial Product Price Index) for petroleum products, and several plants increasing production after previous slowdowns.

By Province
Sales in Ontario decreased by 7.8% in May, largely the result of steep declines in the manufacturing of motor vehicles (-26.1%) and motor vehicle parts (-23.1%). The primary metals industry (-15.3%) was also down, contributing to the overall fall in sales in the province. A 14.0% gain in the petroleum and coal products industry only partially offset the decline in sales of transportation equipment.

Sales in Quebec fell 9.1% in May, after a 4.2% gain in April. A 55.1% drop in aerospace products and parts production was largely responsible for the decline. Other industries posting weaker sales included primary metals (-5.4%), petroleum and coal products (-4.4%) and food (-3.1%).

Excluding Ontario and Quebec, manufacturing sales in Canada were relatively unchanged in May, edging down 0.2%.

The Atlantic provinces as a whole reported a 6.7% increase in sales in May. The rise in sales reflected higher volumes and prices in the petroleum and coal products industry.

Inventories
Manufacturers reported a 2.1% decline in inventories compared with April, with levels falling to $63.0 billion. This was the fourth consecutive monthly decline.

Inventory declines were concentrated in the primary metals industry (-5.0%), the paper industry (-4.3%), the transportation equipment industry (-4.1%) and fabricated metal products (-2.0%).

The decline in inventories was not sufficient to keep pace with the decline in sales, as the inventory-to-sales ratio increased from 1.58 in April to 1.64 in May. As a result, the inventory-to-sales ratio returned to levels similar to the recent peak reached in January 2009.

Unfilled orders
The backlog of unfilled orders fell 6.9% in May to $58.7 billion, extending the 6.2% decline posted in April. Unfilled orders for the most part steadily increased between 2005 and 2008. However, recent months have reversed this trend, with unfilled orders falling in five of the previous six months.

In May, the aerospace industry reported one of the sharpest drops in unfilled orders, falling by 10.6% or $3.7 billion. Excluding aerospace products and parts, unfilled orders decreased 2.4%.

New orders fell 7.2% in May to $34.1 billion. This was the lowest level recorded since November 1996.

Source: Statistics Canada