increases. Inventories were drawn down in&nbsp ; 13&nbsp ; of&nbsp ; 21&nbsp ; industries, with petroleum and coal accounting for two-thirds of the drop. Food product inventories have risen in eight of the last nine months, while aerospace product and parts inventories have risen through the fourth quarter of&nbsp ; 2006.

By stage of fabrication, goods in process inventories had climbed consistently over the past two years but have now fallen marginally in November and December. Inventories of raw materials have fallen in three of the last four months while finished products inventories has risen steadily over the last six months.

Inventory-to-Shipment Ratio Slips
The inventory-to-shipment ratio fell to&nbsp ; 1.27&nbsp ; from&nbsp ; 1.30&nbsp ; in November. The ratio had peaked at&nbsp ; 1.33&nbsp ; in October, rising for three consecutive months before turning back in November. The average inventory-to-shipment ratio for&nbsp ; 2006&nbsp ; was&nbsp ; 1.28,&nbsp ; 0.38&nbsp ; higher than the average level for&nbsp ; 2004&nbsp ; and&nbsp ; 2005.

With shipments rising and drawing down finished goods inventories, the finished product inventory-to-shipment ratio fell to&nbsp ; 0.45&nbsp ; from October’s peak level of&nbsp ; 0.47. The average finished product inventory-to-shipment ratio for&nbsp ; 2006&nbsp ; was&nbsp ; 0.45, which is consistent with levels seen over the past several years.

The inventory-to-shipment ratio is a key measure of the time, in months, that would be required to exhaust inventories if shipments were to remain at their current level.

Economic Indicators at MDM’s Databank

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by&nbsp ; 4.7% to&nbsp ; $4.9&nbsp ; billion. Following November’s moderate price decline, prices rose&nbsp ; 4.7% in December.

Shipments Up in 7 Provinces
Shipments in Ontario and Quebec continued to benefit from the resurgence in the transportation equipments sector in December.

Ontario shipments increased&nbsp ; 2.8% to just over&nbsp ; $24.5&nbsp ; billion in December. Overall,&nbsp ; 12&nbsp ; of the&nbsp ; 21&nbsp ; industries registered increases, but the transportation equipment sector was behind Ontario’s jump in shipments, contributing&nbsp ; 58% of the&nbsp ; $670&nbsp ; million increase. Transportation shipments rose&nbsp ; 4.9% to&nbsp ; $8.3&nbsp ; billion, the highest level since December&nbsp ; 2005. Excluding transportation, shipments would have risen&nbsp ; 1.2%.

In spite of solid growth in the transportation equipment sector in Quebec, shipments fell by&nbsp ; 0.9% to&nbsp ; $11.9&nbsp ; billion, as chemical shipments returned to normal levels after two months of stronger than normal demand. Quebec’s largest manufacturing industry, primary metals, also decreased in December, returning to normal levels after high commodity prices elevated the value of shipments in November. These declines were almost completely offset by increases in machinery manufacturing, petroleum and coal products and the aerospace industry.

Shipments by manufacturers in the Atlantic provinces grew by&nbsp ; 1.4% to&nbsp ; $2.3&nbsp ; billion. New Brunswick, which accounted for nearly half of the region’s shipments edged down&nbsp ; 0.2% in December. Newfoundland and Labrador accounted for the majority of the increase in December, while Prince Edward Island and Nova Scotia registered small increases. In all Atlantic provinces but New Brunswick, the food industry was a major contributor to the advance.

Shipments from Alberta increased&nbsp ; 1.8% to&nbsp ; $5.3&nbsp ; billion in December. Increases were widespread in December, with&nbsp ; 15&nbsp ; of&nbsp ; 21&nbsp ; industries reporting increases. The largest increase was in petroleum and coal products, which advanced&nbsp ; 4.9% to&nbsp ; $1.1&nbsp ; billion. Other significant contributors to the increase were the chemicals industry, which advanced&nbsp ; 2.3% to&nbsp ; $1.2&nbsp ; billion. Non-metallic mineral and the primary metals industries both climbed by almost&nbsp ; 12%. These gains were offset by&nbsp ; 11% decreases in the paper and the computer and electronics industries.

Shipments from British Columbia advanced&nbsp ; 2.1% to&nbsp ; $3.5&nbsp ; billion. Overall,&nbsp ; 13&nbsp ; of&nbsp ; 21&nbsp ; industries increased in December. After significant declines in November, the paper industry rebounded by&nbsp ; 3.2% to&nbsp ; $474&nbsp ; million. Wood products manufacturing also increased&nbsp ; 2.0% to&nbsp ; $726&nbsp ; million, returning to the level of October but the overall trend for this industry is still downward. These gains were offset by declines in the transportation equipment, beverages and tobacco and primary metals industries.

Aerospace Unfilled Orders Rise
Unfilled orders increased&nbsp ; 2.1% to&nbsp ; $42.9&nbsp ; billion, the highest level in four years. The transportation equipment sector, namely aerospace and motor vehicles, typically account for half of all unfilled orders in the manufacturing sector.

Unfilled orders in the transportation equipment industry increased by&nbsp ; $876&nbsp ; million in December. Strong order bookings in aerospace resulted in a&nbsp ; $334&nbsp ; million increase in orders destined for delivery at a future date, to their highest level in four years, while year-end orders for motor vehicles tailed-off to offset some of the gain.

Inventories Fall
Total inventories for manufacturers decreased&nbsp ; 0.6% to&nbsp ; $63.1&nbsp ; billion in December after five consecutive

Taken from Statistics Canada

Canadian manufacturers ended&nbsp ; 2006&nbsp ; on a positive note as factory shipments increased for the second month in a row in December, thanks to strength in the transportation equipment sector.

The year-end rally was not enough to offset several months of weak performances earlier in the year. As a result, total shipments for&nbsp ; 2006&nbsp ; as a whole edged down&nbsp ; 0.6% to&nbsp ; $587.4&nbsp ; billion from the peak level in&nbsp ; 2005.

December’s increase was widespread, with&nbsp ; 13&nbsp ; sectors representing&nbsp ; 74% of total output improving. On a monthly basis, factories shipped goods worth an estimated&nbsp ; $49.7&nbsp ; billion in December, up&nbsp ; 1.7% from November. The transportation sector, led by automobiles, shipped&nbsp ; $10.2&nbsp ; billion worth of product in December, the first time in&nbsp ; 2006&nbsp ; that it had surpassed the $10-billion mark.

There were no clear winners and losers among the various sectors in manufacturing last year. Taking price fluctuations into account, the annual volume of shipments fell&nbsp ; 1.6% to&nbsp ; $539.3&nbsp ; billion, a decline of nearly&nbsp ; $9&nbsp ; billion.

Still,&nbsp ; 2005&nbsp ; had seen the highest level of constant dollar shipments on record while&nbsp ; 2006&nbsp ; real shipments were more in line with&nbsp ; 2003&nbsp ; levels.

Again, taking price fluctuations into account, the volume of shipments in December rose&nbsp ; 1.4% to&nbsp ; $45.6&nbsp ; billion.

December’s shipments of durable goods jumped&nbsp ; 3.0% to&nbsp ; $27.5&nbsp ; billion, the third consecutive monthly increase following declines through the third quarter. Again, this was due to a strong showing in the transportation equipment sector.

Non-durable goods shipments edged up&nbsp ; 0.2% to&nbsp ; $22.2&nbsp ; billion in December. Higher shipments of petroleum and coal were nearly offset by declines in chemicals.

Manufacturers started&nbsp ; 2006&nbsp ; in a cautious mood, according to the Business Conditions Survey through&nbsp ; 2006, but became increasingly pessimistic as the year wore on. Coming off a stellar year in&nbsp ; 2005, respondents to the opinion survey reported that the appreciation of the Canadian dollar, higher raw materials costs and competition from cheaper foreign imports were growing impediments to production. Meanwhile, manufacturers in Western Canada listed a lack of skilled labour as a limiting factor to production.

In&nbsp ; 2006, manufacturing job losses were seen primarily in Ontario and Quebec. In contrast, large gains in manufacturing were seen in Alberta, British Columbia and Manitoba over the course of the year.

According to the Labour Force Survey, manufacturing employment took an upturn in December, as the sector gained&nbsp ; 10,000&nbsp ; jobs. But during&nbsp ; 2006&nbsp ; as a whole, manufacturing lost&nbsp ; 59,000&nbsp ; jobs, a&nbsp ; 2.7% decline from&nbsp ; 2005.

Transportation Equipment Shipments High
Motor vehicle shipments increased&nbsp ; 7.2% to&nbsp ; $5.6&nbsp ; billion, driving the transportation equipment sector revival, now in its second month after four consecutive losses. The sector shipped&nbsp ; $10.2&nbsp ; billion worth of product in December, the first time it has passed the $10-billion mark in&nbsp ; 2006.

Aerospace shipments rose&nbsp ; 4.1% to&nbsp ; $1.4&nbsp ; billion, the second consecutive monthly gain. In spite of a shaky first half of the year, aerospace shipments in&nbsp ; 2006&nbsp ; finished the year down only&nbsp ; 0.7% compared to&nbsp ; 2005, as a result of strong shipments in November and December&nbsp ; 2006.

Riding an increase in the price of petroleum and coal products in December, shipments from Canadian refineries advanced