Canadian manufacturers started 2008 with a modest but positive lift in sales. Manufacturing sales increased by 1.3% in January to $49.3 billion, as the sector struggled to spring back from the three-year low posted in December (-3.7%).
Notwithstanding January's increase, manufacturing sales, which have been trending downward for much of the last year, remained 7.1% below the recent peak reached in March 2007 ($53.1 billion) and with the exception of the previous month, January 2008 marked the lowest sales level since March of 2005.
Much of the weakness continued to come from the motor vehicle and parts industry, which has toiled against a number of production impediments in recent months. Overall, 16 of 21 industries posted increases for the month, representing just over three-quarters (76%) of total manufacturing sales. Both durable (+1.8%) and non-durable (+0.8%) goods industries contributed to reversing the downward movement.
At 2002 prices, manufacturing sales increased 2.0% to $47.7 billion in January, the first monthly increase since October, and only the second positive movement in the past six months. Increases aside, the volume of goods shipped were still 3.5% below the levels of a year earlier.
Motor vehicles recover marginally The motor vehicles industry was the primary driver of January's increase. Manufacturing sales of motor vehicles lifted 4.5% to $3.9 billion, regaining some of the lost ground from the 25.6% decline in December. December aside, motor vehicle manufacturing stood at its lowest level in almost a decade. A number of factors, including a softening US export market, retooling of assembly lines for new models and inventory control measures at the retail level, continued to affect several of the key producers.
Other positive movements in January were observed in the machinery and food manufacturing industries. After three consecutive decreases, machinery sales rebounded 5.8% to $2.7 billion on the strength of widespread gains. Higher grain prices and record production from oilseed processors helped to push the sales of food manufacturers up 1.3% to $6.1 billion.
On the flip side, production of aerospace products and parts fell 4.1% to $1.3 billion in January. Although this marked the second consecutive monthly decline, robust demand for aircraft and parts, based on record high unfilled orders, should keep manufacturers busy in the foreseeable future.
Manufacturing sales by the chemical industry also slipped in January, losing 1.4% to $4.1 billion. This marked the third decrease in four months. Petrochemical and fertilizer manufacturers were the primary catalysts of the drop.
By province Manufacturing sales increased in seven provinces in January, as the moderate gains were widespread.
Ontario (+2.0%) and Quebec (+1.2%) were both integral to the $633 million (+1.3%) lift in January sales, accounting for almost 97% ($612 million) of the total jump. The Central provinces showed considerable resilience for the month, as both Ontario and Quebec were the primary contributors to December's woeful sales performance. Ontario was buoyed primarily by motor vehicles (+5.5%) and machinery (+10.0%) producers, while Quebec was bolstered by significant movements in electrical equipment (+12.0%), paper (+8.0%) and food (+2.7%) manufacturing.
The downward rollercoaster ride of the big two provinces continued to show volatility, as both have seen nearly as many positive as negative sales movements in the past 12 months.