Canadian manufacturing outlook worsens: survey

Tue Jan 29, 2008 11:49am EST
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OTTAWA (Reuters) - Canadian manufacturers are showing the bleakest outlook on production since 2002 as they struggle with a strong Canadian dollar, high oil prices and the U.S. slowdown, according to a Statistics Canada survey on Tuesday.

Thirty-three percent of the 3,000 companies participating in the first-quarter survey forecast production volumes would decline in the next three months, up from 24 percent in the previous quarter. The number expecting higher output fell to 19 percent from 24 percent.

The balance of opinion -- the difference between the two percentages -- therefore fell sharply to -14. Statscan said that was the biggest negative balance of opinion since the -23 that was reported in January 2002.

"And things aren't likely to improve this year, with the U.S. likely entering recession and the global economy slowing as well. On top of that, the loonie (Canadian dollar) remains strong, eroding competitiveness," said Benjamin Reitzes, senior economist at BMO Capital Markets.

"Canadian manufacturers are hoping that rate cuts in Canada and the U.S. will provide the boost the sector desperately needs," he said.

Manufacturers producing durable goods were much less upbeat than their counterparts producing nondurable goods, the survey showed.

The results do not point to a recession in Canada, argued Jacqui Douglas, economics strategist at TD Securities. Sentiment about production and employment was not as low as during the 2001-2002 slowdown, she said.

Manufacturers' forecasts for hiring also worsened in the quarter, with 21 percent seeing a decrease in employment, compared with 18 percent in the final quarter of last year.

But their satisfaction with new orders, unfilled orders and inventories improved and only 28 percent reported production difficulties, down from 36 percent in the last survey.   Continued...