Quick take

Knee-deep in water, manufacturers shift into high gear in November

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Cars being built on assembly line
  • Canadian manufacturing sales rose by 2.6 per cent (m/m) in November. This was slightly lower than Statistics Canada’s flash estimate, which called for a 3.1 per cent increase. After accounting for price effects, manufacturing sales rose by 1.9 per cent.
  • Sales grew in 18 of the 21 manufacturing subsectors. Sales of non-metallic mineral products (+10.4 per cent) and leather and allied products (+7.6 per cent) grew the most. Meanwhile, sales of beverage and tobacco products (–4.4 per cent) saw the sharpest decline.
  • Manufacturing sales grew in 7 of 10 provinces, especially in Quebec (+6.7 per cent) and Newfoundland and Labrador (+5.6 per cent). Sales fell in Saskatchewan (–3.8 per cent) and Manitoba (–3.6 per cent) and declined slightly in British Columbia.
  • New orders increased by 3.0 per cent, while unfilled orders grew by 0.4 per cent.

Key Insights:

  • Flooding in British Columbia led to material shortages and transportation issues for several manufacturers in November, and many supply chain currents are still flowing against the industry. Yet, activity in the sector continued to grow. Motor vehicle manufacturing sales, which have been plagued by semiconductor shortages, managed to grow by 2.6 per cent. But sustainable material supplies are still some time off. Though a transition won’t happen overnight, the longer the pandemic-induced supply chain disruptions continue, the more incentives firms may have to switch to local or nearshored production.
  • Labour shortages remain a serious challenge for the manufacturing sector. In the third quarter, job vacancies were nearly double their five-year average. Vacancies were especially high in the food manufacturing sector, where some industry lobby groups are calling for an expansion of the Temporary Foreign Worker program to meet the demand for labour. In the wake of Omicron, manufacturers are also having to cope with staff absenteeism due to illness and isolation protocols. Production volumes will take a hit if the latest variant continues to spread.
  • Meanwhile, the Biden Administration’s controversial plan to incentivize purchases of U.S.-made electric vehicles is making the Canadian auto sector uneasy. The program would amount to a restrictive tariff on Canadian-made EVs, which could effectively close the U.S. market for Canadian automakers. While the legislation behind the plan has encountered roadblocks, this kind of uncertainty is never favourable for investment.
Kiefer Van Mulligen

Kiefer Van Mulligen

Economist

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