Manufacturing sales decreased 3.3% to $51.2 billion in February, following three months of consecutive gains.
Sales were down in 16 of 21 industries, representing 73.5% of the manufacturing sector. Motor vehicles and petroleum and coal products were responsible for over two-thirds of the decrease. Motor vehicle parts, aerospace product and parts, and machinery also contributed to the decline.
In constant dollars, sales declined 2.0%, reflecting a lower volume of goods sold.
Motor vehicles and petroleum and coal post largest decreases
Sales of motor vehicles fell 10.5% in February, following four consecutive gains. In February, motor vehicle manufacturers typically continue to ramp up from their December shutdowns. This year, the gain in unadjusted sales was smaller than usual, which led to the drop, after seasonal adjustment was applied. Despite the seasonally adjusted decrease, unadjusted sales for the industry are at the highest level since March 2007. The industry has experienced sustained growth over the last year as manufacturers shifted production towards higher-end or more expensive vehicles.
Sales of petroleum and coal products fell 12.6% in February, a ninth consecutive decrease. Prices declined for the eighth consecutive month, down 4.3% on a monthly basis according to the Industrial Product Price Index. Over the last year, the industry’s weaker performance has reflected lower prices. Operating profits for petroleum and coal products fell 30.6% in the fourth quarter, the second consecutive quarterly decline according to the Quarterly Financial Statistics for Enterprises.
The motor vehicle parts industry declined 2.9%, following five consecutive increases. Most motor vehicle assembly plants order parts on a just-in-time basis, often keeping less than a day of inventory on hand, so the performance of the parts industry tends to follow that of motor vehicles.
Production in aerospace product and parts fell 4.0%, a second consecutive decline.
Lower sales of machinery also contributed to the overall decrease. Sales fell 2.7% for the industry and are at the lowest level since April 2011. Machinery manufacturers tied to the oil and gas extraction sector have reported lower demand over the last year and some establishments have closed.
Sales down in seven provinces
Sales declined in seven provinces in February, with Ontario, Quebec and New Brunswick posting the largest decreases.
Sales in Ontario were down 3.2% to $25.6 billion, following four consecutive monthly gains. The decline in February reflected a 10.5% drop in motor vehicle sales and a 2.9% decrease in sales of motor vehicle parts.
After three months of increases, sales in Quebec fell 4.1%. The decrease was mostly caused by a drop in petroleum and coal products and a 10.1% decline in the aerospace product and parts industry. Sales were also down in fabricated metal products (-5.7%).
In New Brunswick, sales fell 17.2% to $1.2 billion, mainly as a result of a 21.9% drop in non-durable goods sales. Exports of refined petroleum product also declined. Manufacturing sales in the province have generally been on a downward trend since May 2015, when they were $1.6 billion. Since then, sales have declined 23.7%.
Inventories fell 0.7% in February, reaching the lowest level since March 2015. Inventories decreased in 10 of 21 industries. Lower inventories for petroleum and coal product, computer and electronic product, and aerospace product and parts accounted for the majority of the decline. The decrease in aerospace reflects a stronger Canadian dollar relative to the US dollar. Inventories are mainly held in US dollars for the aerospace industry, so currency fluctuations will influence trends.
The inventory-to-sales ratio increased from 1.36 in January to 1.40 in February. This 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 declined 2.3% in February, as manufacturers in 13 of 21 industries reported decreases. A 3.1% decline in unfilled orders of aerospace product and parts accounted for most of the drop in February.
New orders were down 8.1%, the largest decline since February 2015. There were fewer new orders in the aerospace, motor vehicle, and petroleum and coal product industries.