- Canadian manufacturing sales declined 3.6% to $71.5 billion in February, following a 4.5% increase in January. This decline was observed in 12 of 21 industries, led by the petroleum and coal products (-14.9%), motor vehicle (-12.3%), and primary metal (-4.2%) industries.
- Sales in real terms decreased by 2.4% in February and the Industrial Product Price Index edged down 0.8%.
- The machinery and electrical equipment, appliance, and component industries posted the largest increases, while the petroleum and coal product, motor vehicle, and primary metal industries saw the largest declines.
Editor’s Notes: In this report, we have used data from the Statistics Canada website.
Manufacturing is an important sector of the Canadian economy, accounting for approximately 10% of the country’s GDP. The Monthly Survey of Manufacturing provides valuable insights into the performance of this sector, including trends in sales, exports, and inventory levels. Here’s a closer look at the latest numbers from the survey for February 2023.
Canadian manufacturing sales decline in February
Canadian manufacturing sales declined 3.6% to $71.5 billion in February, following a 4.5% increase in January. This decline was observed in 12 of 21 industries, led by the petroleum and coal products (-14.9%), motor vehicle (-12.3%), and primary metal (-4.2%) industries. Conversely, the machinery (+3.0%) and electrical equipment, appliance, and component (+6.0%) industries posted the largest increases. Year over year, total sales were up 3.8% in February.
Sales in real terms decrease in February
The monthly decline in Canadian manufacturing sales resulted from lower volumes and prices as sales in real terms decreased by 2.4% in February and the Industrial Product Price Index edged down 0.8%.
Petroleum and coal products drive the decline
Following strong growth in January, sales of petroleum and coal products fell 14.9% to $8.8 billion in February, marking the third-largest monthly decline in dollar terms on record. Sales volumes were down 8.3%. Prices (-6.4%) and exports (-12.8%) of refined petroleum energy products (including liquid biofuels) fell considerably month over month. Maintenance turnaround as well as lower demand for heating fuel likely due to mild weather in most of Europe and the United States could be partly responsible for the monthly declines. Year over year, sales edged down 0.8% in February.
Motor vehicle sales decrease due to an insufficient supply of chips and materials
After three consecutive monthly increases, sales of motor vehicles were down 12.3% to $4.2 billion in February, driven by reduced production associated with an insufficient supply of chips and materials. Fewer calendar days in February compared with January also played a role in the decrease. Sales of motor vehicle parts edged up 0.3% in February, the slowest monthly growth rate in five months. Exports of motor vehicles and parts fell by 4.4%. Despite the monthly decrease, sales of motor vehicles were up 9.5% in February compared with the same month last year.
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Sales of primary metals decline
Sales of primary metals declined 4.2% to $5.6 billion in February, following a 4.4% increase in January, with decreases spanning all five primary metal industries. The non-ferrous metal (except aluminum) production and processing industry (-14.7%) led a decline, coinciding with lower prices of primary non-ferrous metal products (-2.4%) in February.
Other notable contributors to the monthly decline were related to ferrous metal industries such as the steel product manufacturing from purchased steel (-12.2%) and iron steel mills and ferroalloy manufacturing (-6.1%) industries. While prices for primary ferrous metal products increased (+1.7%), exports of most unwrought metal products were down in February. Sales in volume terms declined 4.7% month over month, while every year, sales in current dollars edged down 1.0% in February.
The machinery industry increases the most
Sales in the machinery industry rose 3.0% to a record-high $4.6 billion in February, the fourth consecutive monthly increase. The gain was broad-based, with eight of ten sub-industries posting higher sales, led by the construction, forestry, mining, and industrial machinery, equipment, and supplies sub-industry (+5.1%). Sales of computer and electronic product manufacturing also increased by 2.2% in February, after three consecutive monthly declines. Year over year, the machinery industry recorded the highest growth rate (+14.2%) in February.
The electrical equipment, appliance, and component industry posts strong gains
Sales in the electrical equipment, appliance, and component industry increased 6.0% to $3.3 billion in February, the third consecutive monthly increase. The gain was driven by higher sales of household appliances (+8.8%) and other electrical equipment (+5.5%). Year over year, the industry recorded the second-highest growth rate (+10.7%) in February.
Inventories fall in February
Canadian manufacturing inventories fell 1.8% to $92.6 billion in February, marking the third consecutive monthly decrease. The decline was observed in 14 of 21 industries, led by the petroleum and coal products (-12.2%) and primary metal (-4.8%) industries. Conversely, the transportation equipment (+1.6%) and machinery (+1.4%) industries posted the largest increases.
The inventory-to-sales ratio, which measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level, decreased from 1.32 in January to 1.29 in February.
Unfilled orders increase in February
Unfilled orders in Canadian manufacturing increased 1.6% to $95.5 billion in February, following a 0.5% decrease in January. The gain was driven by higher unfilled orders in the aerospace product and parts (+3.6%) and machinery (+2.5%) industries. Unfilled orders have increased in 10 of the past 12 months and were up 15.0% year over year in February.
New orders decline in February
Canadian manufacturing new orders declined 1.8% to $70.4 billion in February, following a 0.8% increase in January. The decline was observed in 12 of 21 industries, led by the petroleum and coal products (-19.2%) and primary metal (-9.6%) industries. Conversely, the transportation equipment (+3.8%) and machinery (+3.5%) industries posted the largest increases. Year over year, new orders were up 7.0% in February.
Capacity utilization rate falls in February
The Canadian manufacturing sector’s capacity utilization rate (CUR) fell 2.1 percentage points to 76.3% in February, following a 1.3 percentage point increase in January. The decline was observed in 16 of 21 industries, led by the petroleum and coal products (-10.4%) and primary metal (-4.2%) industries. The CUR measures the extent to which an industry’s productive capacity is being used and provides an indicator of the overall health of the manufacturing sector.
| Indicator | February 2023 |
|---|---|
| Manufacturing Sales | $71.5 billion (↓3.6%) |
| Real Terms Sales | ↓2.4% |
| Industrial Product Price Index | ↓0.8% |
| Petroleum and Coal Products Sales | $8.8 billion (↓14.9%) |
| Motor Vehicle Sales | $4.2 billion (↓12.3%) |
| Primary Metals Sales | $5.6 billion (↓4.2%) |
| Machinery Sales | $4.6 billion (↑3.0%) |
| Electrical Equipment Sales | $3.3 billion (↑6.0%) |
| Inventory | $92.6 billion (↓1.8%) |
Note: ↑ indicates an increase, and ↓ indicates a decrease.
Conclusion
The Monthly Survey of Manufacturing for February 2023 reveals a decline in Canadian manufacturing sales, driven by lower sales in petroleum and coal products, motor vehicles, and primary metals. However, the machinery and electrical equipment, appliance, and component industries posted strong gains.
Inventories fell for the third consecutive month, while unfilled orders and new orders experienced increases and decreases, respectively. The capacity utilization rate fell in February, suggesting a decrease in the overall health of the manufacturing sector. The performance of the manufacturing sector will continue to be monitored closely in the coming months to determine whether these trends will persist or change.
