Canadian Manufacturing Shipments Declined In The Fourth Quarter Of Last Year

“Manufacturing sales declined for the third consecutive month, down 1.3% to $56.4 billion in December on lower sales of petroleum and coal products. Excluding this industry, manufacturing sales declined 0.3%. Sales fell in 12 of 21 industries, representing 72.7% of manufacturing sales. Manufacturing sales in volume terms were also down, declining 1.2% in December”. (Statistics Canada, Monthly Survey of Manufacturing, December 2018)

Based on total figures for 2018, Canadian manufacturing activity was quite strong last year. In 2018, Canadian manufacturing shipments rose 5.4% to $686.4 billion. This was the third consecutive annual increase for Canadian manufacturing shipments, following a 6.1% growth in sales posted in 2017. In constant dollar terms, sales increased 2.1% last year, also representing the third consecutive annual increase.

In dollar terms, several prominent Canadian manufacturing sectors truly soared last year, including clothing manufacturing (up 24.4%), fabricated metals (16.3%), aerospace products (19.4%) and railway rolling stock (25.4%).

Nonetheless, there were a number of disquieting signs emerging towards the end of last year. Thus, Canadian manufacturing shipments (in current dollar terms) fell 1.3% in December to $56.4 billion. The decline in December sales was quite widespread as it involved 12 of the 21 broad industries groups.

When price movements are removed from the shipment figures, the volume of factory sales dropped 1.2% in the last month of 2018, and inventories slid down 0.2%.

As a national Bank report indicates, the real inventory-to-sales ratio rose to 1.48, its highest level since the recession ten years earlier.

While the capacity utilization figure may have less meaning than one would wish, the unadjusted capacity utilization rate for the manufacturing sector decreased from 79.4% in November to 75.9% in December.

Finally, using quarterly data, real manufacturing shipments declined at a 4.3% annual rate in the fourth quarter, following 11 consecutive quarters of positive manufacturing growth.

The real worry stemming from the fourth quarter weakness is that it is a rather poor indicator of future production growth.

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