Manufacturing shipments, after impressive gains in April that were seen to signal the recovery of the business sector, slipped 1.4% in May to $43.4 billion, Statistics Canada reports.
Canadian manufacturing shipments had surged 5.2% surge in April.
The recent movements in shipments were fuelled by the automotive sector. Excluding both the motor vehicles and parts industries, total manufacturing shipments declined only 0.1%. Shipment levels remained strong compared with the same period of 2001.
Despite May’s decline in shipments, Canada’s manufacturing sector has been upbeat in 2002. Only 10 of 21 industries decreased in May, representing 49% of total shipments.
Taking a regional perspective, seven provinces reported lower shipments in May compared with April. Only Quebec, Alberta, British Columbia and the territories increased manufacturing output in May.
Manufacturers of motor vehicles took a break in May, following exceptional production levels in April. Shipments declined 7.5% to $5.5 billion, after the 14.4% surge in April. As well, the motor vehicle parts industry decreased 4.4% to $2.7 billion, following April’s 9.2% jump. Generous financial incentives coupled with low interest rates and a recovering job market contributed to higher sales of cars and trucks in Canada and lower dealer inventories in the United States.
Looking at shipments by industry sector, although factory output in the automotive sector declined in May, levels remained among the highest for the last year and a half. In recent months, several plants returned to full production from temporary shutdowns. In addition, manufacturers have stepped up production of new models for the coming year and the resumption of overtime work was prevalent at some plants.
The motor vehicle parts industry and the plastics and rubber products industry both declined in May as well, riding the coat-tails of the lower output by motor vehicle manufacturers. The parts industry decreased 4.4% from April’s all-time high and shipments of plastics and rubber products fell 3.8% to $1.9 billion. Many firms in the plastics and rubber products industry supply goods for the automotive sector.
Wood product shipments fall for the first time in six months
Shipments of wood products declined 2.2% to $2.6 billion, the first decrease in six months. Shipments in April had reached the highest level since January 2000, which coincided with the temporary expiration of US softwood lumber duties from April 22 to May 21, 2002. The prices for lumber, sawmill and other wood products have also softened over the last couple of months. A gradual weakening in demand for wood products and an oversupply of lumber were factors influencing the price.
Helping to offset May’s decrease were shipment gains in the petroleum and coal products industry (+4.4%) and the computer and electronic products industry (+6.0%). The recovery in manufacturing activity in 2002 and a cooler-than-normal spring gave rise to higher demand for petroleum and coal products. Shipments of computer and electronic products are up for the sixth time in seven months, although production remained well below the levels of May 2001. Despite the modest upswing in shipments of computer and electronic products, market uncertainty in the long term continues to cast shadows on this industry.