Source: Statistics Canada
The Canada/U.S. exchange rate, as well as a notable decrease in the price of petroleum and coal products, both affected October’s manufacturing results. The change in the exchange rate had a strengthening effect for manufacturers who determine their prices in U.S. dollars. On the other hand, the price of petroleum and coal products dropped 13.5% in October, reducing the value of sales in that industry.
In constant dollars, manufacturing sales decreased 1.8% compared with September, bringing constant dollar sales to their lowest level since December 2001.
In October, 8 of 21 manufacturing industries, accounting for about 40% of total sales, posted decreases.
By Sector
Petroleum and coal product sales led the decrease in October, posting a decline of 7.3% in October that was largely due to lower prices. Petroleum and coal product sales have fallen for four consecutive months, and were 18.1% lower than the peak reached in June 2008.
On the other hand, the transportation equipment industry advanced 2.3% in October, led by aerospace products and parts production, which increased 23.7% during the month. Many manufacturers in the industry price their products in US dollars, which buoyed their results compared with September.
By Province
In October, seven provinces reported a decrease in manufacturing sales compared with September. Only New Brunswick, Quebec, and British Columbia reported gains during the month.
Manufacturing sales in Alberta fell 6.8% in October, erasing all the gains registered since May 2008. A plant shutdown, combined with a drop in prices, led to a 21.2% decrease in the sales of petroleum and coal products in October. Chemical product manufacturers also contributed to the decrease, as their sales declined 8.6%.
Manufacturing sales in Ontario decreased for a third consecutive month, dropping 1.0% in October. Motor vehicle manufacturing sales fell 5.7% and primarily accounted for lower sales in the province. Much of the weakness in Ontario was due to an automotive plant shutdown that lasted most of the month. Petroleum and coal product sales were also a factor this month, decreasing 7.1%.
Quebec manufacturers reported back-to-back monthly gains, with October sales increasing by 2.9%. Transportation equipment manufacturing sales, led by the aerospace industry, posted an increase of 34.1%, in part due to numerous manufacturers determining their prices in US dollars.
Inventory Levels
After falling to a two-year low in February 2008, inventory levels posted seven increases in eight months. Inventory levels in October rose 1.3% to $68.6 billion, as 16 of 21 industries reported higher inventory levels. Raw material inventories increased the most, up 1.7%.
The change in the exchange rate in October was a major factor in the rising value of inventories. The transportation equipment industry reported the largest inventory increases. Aerospace inventories rose 10.7% while motor vehicle manufacturers’ inventories rose 9.1%. Computer and electronic product manufacturers also reported a notable increase to their inventories (+6.5%).
However, lower oil prices reduced the value of inventories reported by petroleum and coal product manufacturers (-10.0%).
The inventory-to-sales ratio advanced to 1.33 in October, the highest level since January 2008. The ratio had been trending downward in 2008, reaching 1.25 in July before reversing direction over the last few months. The inventory-to-sales ratio is a measure of the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.
Unfilled orders posted an increase of 6.8% in October, entirely attributable to the rise of 13.9% in aerospace manufacturing, which in turn was due to changes in the exchange rate. Excluding the aerospace industry, unfilled orders decreased 0.3% in October.
New orders also increased notably in October, rising 8.8% after two months of decreases. Excluding the aerospace industry, new orders fell 1.5% compared with September.
