Recovery is coming, it really is. It just may take a bit for it to happen to manufacturing.
According to Statistics Canada, manufacturing shipments fell by 1.8 per cent in the month of December. That's in contrast to the market's expectation of 0.5-per-cent growth. The December decline was broadly based, encompassing 15 of the 21 industry groups monitored by Statscan.
The Canadian manufacturing sector was an early victim of the U.S recession. Our manufacturing shipments started to trend down in October, 2000, months before the U.S. economy really started to falter. Since then, the level of shipments has dipped by nearly 3 per cent. With the U.S. economy now at or near a turning point (the closely watched U.S. Purchasing Managers' Index suggests manufacturing there will move up soon) things should be looking up on this side of the border too.
And they would be, if not for that inventory thing.
It's an old story. During the good times, inventories in each of the Canadian and U.S. economies got too high. When things slowed, there was a big backlog to work through. In the United States, a lot of progress has been made on that front. Not so in Canada, or so it seems. A separate Statscan survey suggests that one-third of manufacturers see their inventories as too high, and more than one-third figure on reducing production in the first quarter of 2002.
The good news is that markets, including the currency markets, are pretty much ignoring the dismal Canadian numbers. With good news still seeping out of the United States (their housing sector is hot), George W in Japan, and earnings everywhere, there's too much to watch right now. In terms of the loonie, that might mean that this bad news report is for free. Best not to make this kind of a thing a habit, however.
We get Canadian retail sales and trade data later this week.
Stay tuned.