OTTAWA — Manufacturing has been viewed, fairly or not, as the sick sector of Canada, still struggling to shake off the 2008-09 recession and get back on its feet.
The long recovery period has been well-charted, with many critics blaming the industry for not doing enough to help itself out. The usual prescriptions have always called for more investment and expansion into new markets. The cheap Canadian dollar was supposed to assist in the healing process by making Canadian exports all the more palatable.
The process has been slow and inconsistent. But as the latest data show, there is some progress being made.
Factory shipments declined by 0.9 per cent in March, according to Statistics Canada, compared with a decline of four per cent in February.
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Tuesday’s report from the federal data agency was not as bad as feared. Analysts had forecast a drop in manufacturing of about 1.8 per cent in March. Also, signs of a slight weakening in the U.S. economy had been expected to push Canadian sales down more than Tuesday’s data indicated.
“It will take time and a cheap currency for the long term to regain manufacturing capacity and output, and March is another data point that highlights that Canadian factories still face headwinds,” said Nick Exarhos, an economist at CIBC Capital Markets.
“Even if we expect soft readings from wholesaling and retailing later this week, the negative impact from manufacturing won’t be as large as we had feared.”
Jayson Myers, president and CEO of Canadian Manufacturers & Exporters, said sales in the factory sector “have recovered from pre-recessionary levels.”
“It’s not the same companies, of course. There are new sales, new product lines, much more specialized products, much more diversified exports markets,” Myers said. “It was the resource sector that boosted manufacturing coming out of the recession up until 2013. If you take energy out of our exports, you’re pretty much left with manufactured exports — and they’re up by 25 per cent since the beginning of 2014.”
He added: “So, in a way, the (low) dollar is doing its job.”
Still, manufacturing sales in March were down in 16 of 21 industries tracked by StatsCan.
“Importantly, volumes were up just a touch,” said Robert Kavcic, senior economist at BMO Capital Markets.
“So, that does sort of help support the case that we will see a bit of a bounce back in GDP in March — after we saw a two-tenths decline in February —and pretty solid growth for all of the first quarter still,” he said.
Annualized Q1 growth is likely to come in at 2.9 per cent in Q1, Kavcic noted.
“Keep in mind, that comes off a sub-one-per-cent reading in Q4,” he added.
The underlying trend is positive for Canada.
“What we’re seeing in the long-term, though, are trends that are rally reshaping the business of manufacturing not just around the world, but here in Canada,” Myers said.
“One is the adoption of new technology where we’re looking at companies that are integrating digital technologies and new materials, new manufacturing processes…. So, that’s having a big impact.”