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Manufacturing Performing Poorly, But Signs Point to a Turnaround

May 16, 2019

Manufacturing Performing Poorly, But Signs Point to a Turnaround 

Ottawa,May 16, 2019—The Conference Board of Canada’s Economist Robyn Gibbard offers the following insights on today's Monthly Survey of Manufacturing: 

“While we saw a strong upward trend in manufacturing sales from mid-2017 to mid-2018, that trend reversed in the second half of 2018. With a few good months in early 2019, we may, once again, be seeing the beginning of an upward trend. An upward trend in this sector would be good news for the Canadian economy.” 

Insights:  

  • Canada’s manufacturing sector has struggled recently, with shipments up just 1.4 per cent year-on-year. This is a relatively slow pace of growth and means that manufacturing sales grew slower than the Canadian economy over the past year.
  • Transportation, the largest manufacturing sector in Canada, saw shipments decline 0.7 per cent ($87.5 million) year-on-year. The largest loser in dollar terms was the wood products manufacturing sector, which saw shipments decline by 12.4 per cent ($361.0 million) year-on-year.
  • However, in March manufacturing shipments increased by 2.1 per cent,to $58.0 billion.The growth was led by rising shipments of transportation equipment, energy products, and primary metal products.Although monthly numbers can be volatile, our calculations show the trend line for manufacturing shipments has now turned upwards.If trend growth continues, 2019 could be a better year for Canadian manufacturers.
  • The largest drivers of growth over the past year have been machinery and equipment manufacturing (up $562.3 million),fabricated metal products ($250.3 million), and petroleum and coal products ($271.7 million). Perhaps not a coincidence that these industries rely on inputs of Canadian raw materials (metals and energy products) that have seen their prices tumble over the past year, making the products manufactured with them cheaper for buyers.
  • The capacity utilization rate in manufacturing industries rose from 78.5 per cent to 80.7 per cent. That is a relatively high level of capacity utilization, and it means some manufacturers are likely facing capacity constraints.Consequently, further increases in sales will depend on higher investment to expand their production capacity.

 

Content Attribution: 
Robyn Gibbard, Economist
The Conference Board of Canada 

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