Factory Sales Continue Their Upward Trend in December, Reach Record High in 2021
- Manufacturing sales rose for a third consecutive month in December, rising 0.7% to $64.0 billion.
- The increase spanned 5 of 11 major industries, led by plastics and rubber products and motor vehicle and parts.
- Sales were up in 7 of 10 provinces, with Ontario and Alberta contributing the most to the growth.
- Total inventories hit yet another all-time high, helping to push up the inventory-to-sales ratio from 1.59 in November to 1.61 in December.
- Forward-looking indictors were positive, with unfilled orders and new orders up 1.7% and 1.4%, respectively.
- The capacity utilization rate declined from 78.2% in November to 77.1% in December.
- This was the third positive sales report in a row and indicates that Canada’s manufacturing sector headed into 2022 with some solid momentum. That said, persistent supply chain disruptions, high raw material costs, and severe labour shortages still threaten to knock the sector’s fragile recovery off course.
MANUFACTURING SALES UP 0.7% IN DECEMBER
Manufacturing sales rose for a third consecutive month in December, rising 0.7% to $64.0 billion. The picture was still positive after stripping out price effects. In constant dollar terms, factory sales were up 0.6% on the month, indicating a higher volume of goods sold. For the full year 2021, manufacturing sales rose to a record high of $718.4 billion, a strong rebound following a 11.7% decline in 2020.
This was the third positive sales report in a row and indicates that Canada’s manufacturing sector headed into 2022 with some solid momentum. That said, persistent supply chain disruptions, high raw material costs, and severe labour shortages still threaten to knock the sector’s fragile recovery off course.
INCREASE IN SALES LED BY PLASTIC AND RUBBER PRODUCTS AND MOTOR VEHICLE AND PARTS
The increase in sales spanned 5 of 11 major industries. The plastic and rubber products sector contributed the most to the growth, with sales rising 11.8% to a record high of $3.5 billion in December. Sales of motor vehicles and parts increased for the third straight month, up 5.4% to $6.4 billion. While this is yet another good sign that disruptions caused by the global semiconductor shortage are easing, the auto sector still faces a steep uphill climb to recovery. Elsewhere, December was a tough month for the aerospace industry, with sales falling 10.7% to $1.4 billion.
Turning to the annual figures, the record high level of manufacturing sales in 2021 was mainly attributable to higher sales in the petroleum and coal product (+58.9%), primary metal (+40.7%), wood product (+48.4%), food (+14.6%), and chemical product (+19.9%) industries. Together, these five industries accounted for four-fifths of the total increase in sales.
The only major industry to post an annual decline in sales last year was transportation equipment. Specifically, sales in the motor vehicle and parts manufacturing industry tumbled 18.9% to $60.7 billion, its lowest level since the global financial crisis in 2009. At the same time, sales of aerospace products and parts decreased 13.8% to $16.6 billion, its lowest level since 2012.
ONTARIO AND ALBERTA BIGGEST CONTRIBUTORS TO GROWTH IN DECEMBER
Regionally, sales were up in 7 of 10 provinces in December. Ontario led the way with sales rising 1.1% to $27.9 billion, thanks to strong contributions from the motor vehicle, plastics and rubber, and fabricated metal industries. Sales in Alberta increased 1.8% to $7.7 billion in December, mainly on higher sales of petroleum. Manitoba also had a good month, with sales up 7.2% to $1.8 billion. On the negative side, sales in Quebec decreased 1.2% to $16.4 billion, weighed down by a notable decline in sales of aerospace products and parts.
In 2021, every province posted an increase in manufacturing sales, with Ontario (+11.3%), Quebec (+19.5%), and Alberta (+30.8%) leading the way. The weakest performance was registered by Newfoundland and Labrador, where sales eked out a 0.3% gain.
INVENTORY-TO-SALES RATIO INCREASES ON RECORD HIGH INVENTORIES
Total inventories increased for the twelfth month in a row in December, up 1.7% to an all-time high of $102.8 billion. The increase was mainly attributable to higher inventories of transportation equipment and machinery. This helped push up the inventory-to-sales ratio from 1.59 in November to 1.61 in December. This ratio represents the number of months it would take to completely clear inventories assuming sales remain at their current level.
FORWARD-LOOKING INDICATORS ENCOURAGING
Forward-looking indictors were positive. The total value of unfilled orders rose 1.7% to $97.9 billion in December, mostly due to higher unfilled orders of aerospace products and parts. Unfilled orders were up 9.1% on a year-over-year basis.
At the same time, the total value of new orders increased 1.4% to $65.6 billion in December, mainly attributable to higher new orders of transportation equipment. Year-over-year, new orders were up 17.6%.
CAPACITY UTILIZATION RATE FALLS
Finally, the manufacturing sector’s capacity utilization rate declined from 78.2% in November to 77.1% in December, as declines in the food and primary metal sectors more than offset increases in the transportation equipment and chemical industries.