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Manufacturing

Monthly Survey of Manufacturing for October 2015

Ottawa - Manufacturing sales declined 1.1% to $50.4 billion in October, the third consecutive decrease. Declines in the petroleum and coal product, aerospace product and parts, and machinery industries were responsible for the overall drop.

In constant dollar terms, sales were down 1.0%, indicating that lower volumes of manufactured goods were sold.

Declines in the petroleum and coal product, aerospace product and parts, and machinery industries

Sales were down 5.7% to $4.5 billion in the petroleum and coal product industry, the fifth consecutive decline. The decrease in October reflected lower production of refined products. Maintenance and turnaround work at some refineries that began in September continued into October. Although shutdowns for maintenance and turnaround work often occur in September and October, this year the shutdowns were more extensive than usual. Prices, as reported by the Industrial Product Price Index, were down 1.1%. With this latest decline, sales in the industry were at their lowest level since April 2009 ($4.2 billion).

Production in the aerospace product and parts industry fell 10.3% to $1.6 billion. Aerospace production is substantially more volatile compared with the manufacturing sector as a whole. Hence, the decrease in October was not unusually large for the industry. Nevertheless, with this decline, production for the three-month period ending in October was 7.2% lower than the previous three-month period.

Machinery sales fell 4.6% in October to $2.8 billion, largely reflecting lower sales in the commercial and service machinery manufacturing sub-industry. Manufacturers in this sub-industry produce a variety of machines used in the retail and service industries, such as cash registers, photographic equipment, vending machines and simulation equipment. Sales in the sub-industry tend to fluctuate on the basis of the completion of large projects.

Sales also decreased in the primary metal (-2.4%) and the miscellaneous (-6.6%) industries. Declines were widespread in both industries.

The sales declines were partly offset by higher sales in the motor vehicle industry. Motor vehicle sales rose 4.9% to $5.3 billion in October, as a result of higher volumes of vehicles produced. This was the fifth increase in six months. Sales in the industry since the beginning of the year were 7.4% higher compared with the same period (January to October) in 2014.

Sales down in five provinces

Sales declined in five provinces in October, with New Brunswick posting the largest decrease in dollar terms.

In New Brunswick, sales fell 23.9% to $1.1 billion in October, as a result of lower non-durable goods sales. Manufacturing sales in the province have been on a generally downward trend since April 2015, when they were $1.5 billion. Since then, sales have declined 28.2%.

Sales in Quebec declined 2.1% to $11.8 billion in October. The decrease was mostly caused by a 13.3% drop in the aerospace product and parts industry. Sales were also down in the food (-2.5%) and primary metal (-2.4%) industries.

Alberta manufacturing sales were down 1.9% to $5.5 billion in October, the 9th decline in 12 months. On a year-to-date basis, sales were 13.2% lower than the same period in 2014. In October, lower sales in the chemical and machinery industries were responsible for the provincial decrease. In the chemical industry, sales fell 6.2% as a result of widespread declines. Machinery sales decreased 11.4%, mostly because of a drop in the mining and oil and gas field equipment manufacturing sub-industry. Some companies in this sub-industry cited that falling demand stemming from challenges in the oil and gas extraction sector have affected their sales. Sales of mining and oil and gas field equipment are closely tied to activity in the oil and gas extraction sector.

In Ontario, sales rose 0.6% to $24.4 billion, offsetting some of the declines in the other provinces. The gain stemmed from a 4.8% increase in the motor vehicle assembly industry. This was the fifth sales increase in the motor vehicle assembly industry in six months.

Inventories rise

Inventories rose 0.5% to $73.5 billion in October, as a result of gains in the transportation equipment industry and the computer and electronic product industry. A 2.7% decline in primary metal inventories offset a portion of the gains.

In the transportation equipment industry, inventories of aerospace products rose 2.1% to $9.1 billion, the fourth consecutive monthly advance. Computer and electronic product inventories rose 6.1% to $2.8 billion. Gains in the industry were widespread.

The inventory-to-sales ratio increased from 1.44 in September to 1.46 in October. The inventory-to-sales ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Unfilled orders decline

Unfilled orders decreased 1.3% to $94.1 billion in October, largely as a result of lower unfilled orders in the aerospace product and parts industry.

In the aerospace industry, unfilled orders were down 2.1% to $51.6 billion. The decline mostly reflects a 2.3% decrease in the value of the US dollar relative to the Canadian dollar between September 30 and October 30. Most unfilled orders in the aerospace industry are held in US dollars.

New orders fell 1.4% in October, the third consecutive decline. New orders were down in the transportation equipment, petroleum and coal product and primary metal industries.

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