Manufacturing Sales at Present
The two key factors that are coming out as the reason behind such drastic change are the slow economic growth in the US and obviously the rise in the Canadian dollar value. However, one thing should be mentioned here that despite the sharp fall, the sales figure is tracking 1.4 percent higher compared to the sales figure of the last year during the same time.
Now if we consider the sales figures in terms of the industries, the gainer in true sense has been the Petroleum and coal refining sector and the credit largely goes to the recovery in the crude oil price. Manufacturing sectors that have seen an abrupt reversal are Automobile and parts manufacturers with 10.5 percent fall from January to April. Some other industries are Aerospace – 8.5% down, Paper – 6% down and Plastic & rubber products - 4.7% down.
If we look at these sales figures by province, the steepest decline was seen in Saskatchewan followed by Ontario and Quebec. The only province to experience solid manufacturing growth is Alberta due to its refinery output.
The Labour Market in Manufacturing Industry
Now, let’s shift the focus to the manufacturing labour market. Considering such a sharp fall in the manufacturing industry, it was pretty obvious to experience a sharp fall in the manufacturing employment sector as well. During the last quarter of the last year, 25,400 new jobs were added by the manufacturers and from the month of February to May, 36,100 job positions have been reduced by the manufacturers.
However, if we consider the employment data by market value, the number is humbly higher compared to the data of the last year during January to May. It is 0.3% higher compared to 2015. The number itself may not be very encouraging but compared to the present manufacturing industry scenario, it is appreciable.
If we discuss according to the province, BC, Ontario, Alberta - all these provinces have experienced job losses. The number of job cuts in BC is 14,000 in May while Ontario and Alberta stands at 11,300 and 11,000 respectively. But still the rate is higher in most of the provinces compared to the last year even in BC and Ontario. The weekly manufacturing wage rate has also come down 1.6% to $1,081 due to the flattened labour demand.
Orders for new manufacturing goods have experienced a fall in the demand and have opened with a downside. The rate has decreased by 0.8% in the first quarter in 2016. The key reason behind this is the volatile aerospace sector. The orders are down by 40%. But the only good news is the April’s numbers; it shows that new orders are coming in the market suggesting a strong trend ahead.
Despite all these downfalls in the economy, the capacity utilization in the business sectors is continuing to grow higher from 83% in the last quarter of 2015 to 83.2% in the first quarter in 2016. The capacity is tight in a number of companies like paper and wood. The facilities are being operated at 97.6% and 96.9 percent respectively. The situation is almost the same in transportation equipment utilization. The plant capacity of the available industries like food processing, primary metals and furniture is also tightening.
Competition in the Manufacturing Industry
The growth in the manufacturing productivity has been following a sharp rise for the last three quarters. The productivity has increased by 2.3% compared to the figure of the last year spring, However, still it is still not sufficient to cope up the losses of late 2014 and early 2015. Manufacturers though seem to be restless and this is the reason why manufacturing productivity has increased 6.1% over the past five years.
One big concern is certainly the rise in the price of productivity-enhancing machinery over the past few quarters. Prices of imported machinery have increased 3.2% in the Q1 of 2016 compared to the last quarter of the last year. And if we consider the last two year span, the price has increased by almost 26 percent. And according to market data, manufacturers are planning for less investment this year. The estimated amount is $17 billion, less than 2015 ($19.1 Billion) and 2014 ($17.9 Billion).
Condition for Business
The already turmoil Canadian economy got another blow in the form of McMurray Wildfire. It has destroyed homes, shops, factories and most importantly millions of dollars. The impact has been highly negative and can be expected to be the same in the short-term time span. Even, it could cause a small-term recession as well.
The next blow is certainly the exit of the UK from the European Union. The long-term impact of this exit is yet to unfold but as for the short-term, this is an economic downfall for sure. The stock market has crashed badly and the rate of pound has fallen sharply. The interest rate has also been affected. The real interest rate has experienced a fall of 3.7% in Q3 2015 to 2.5% in the first quarter of 2016.
Prompt Assembly & Packaging Inc.