31-532-GIE

Useful Information For Manufacturers And Exporters

Manufacturing

Canada Manufacturing Industry Highlights

The manufacturing industry is a very important part of Canada’s economy. This sector continues to be an important engine of growth in the economy. Approximately 78% of merchandise exports originate from the manufacturing sector. In 1998, manufacturing accounted for nearly 17.8% of the country’s Gross Domestic Product (up slightly from 17.6% in 1997). Almost two million Canadians are employed in about 35,000 factories, while thousands more service these plants.

Manufacturing in Canada continues to prosper given the health of the American economy, and despite the global reaction to financial crises in several countries including the Asian-Pacific crisis in the late 1990s. Manufacturing shipments jumped 6.8% to $434.1 billion in 1997 - even with the impact of price increases taken into account, growth in manufacturing was 3.9%.

Exports drive manufacturing shipments

In 1997, manufacturing shipments were up in every province in Canada, showing an overall increase of 6.8% from 1996, for a total of $434.1 billion dollars. Exports of Canadian manufacturers totalled $249.5 billion in 1998, up 7.5% from the previous year. The chart below shows how manufacturing shipments and exports tend to mirror each other, which illustrates the importance of international trade to the manufacturing sector.

In 1999, production continues to increase primarily because of strong exports to the U.S. and higher sales to European countries. Increased manufacturing productivity has been led by the auto parts, primary and fabricated metals, electronic products and pharmaceuticals sectors. As of June 1999, output increased in 12 of the 22 major manufacturing groups, accounting for 65.8% of total manufacturing Gross Domestic Product.

Source: Statistics Canada, Manufacturing, Construction and Energy Division; International Trade Division
Note: Export and shipment data are valued differently, and therefore, absolute comparisons may not be precise.

Case #1: How manufacturing data can be used

Statistics Canada produces a variety of price and deflation indices that help small, medium, and large businesses to make informed decisions. Sally Wong has recently graduated from university with a chemistry degree. Rather than working in a research laboratory as many of her classmates, she has chosen to use her academic and entrepreneurial skills to start a business. After meeting with a loan officer at her bank, she was advised to do some additional research to improve her business plan. By visiting her local university library, Sally was able to find a wealth of Statistics Canada information to bolster her business report.

To start, Sally used the indices for constant dollars adjustments of chemical prices to better gauge the profit viability of the industry. These indices are adjusted for sales, imports, exports, raw materials and value added. Using 1992 as a benchmark year, petrochemical prices continued to rise until 1998, at which time prices fell approximately to 1989 levels. On the whole, total chemical prices have been falling since 1995, however specific chemical sectors, such as the manufacturing inks, adhesives, and other chemicals have continually increased in price. Generally, rising chemical prices bode well for producers and distributors. It is important to note, however, that as chemical prices have fluctuated across industry segments over the past 10 years, the cost to build and repair chemical plants has risen continually since 1989. These increases in plant construction costs closely reflect the rise in the inflation rate (Consumer Price Index).

Sally decided to open a business by developing a special non-toxic adhesive for potters. The information presented in this table can assist users to measure average price change over time within a specific industry.

Indices Used for Constant Dollar Adjustment

Source: Statistics Canada, Industrial Product Price Indexes, CANSIM No. 1878; National Income and Expenditure Accounts, Quarterly Estimates, Catalogue No. 13-001-XPB; Comsumer Price and Prices Indexes, Catalogue No. 62-010-XPB; Chemical and Petrochemical Process Plant Index for 1981-89, CANSIM No. 294

Note: "r" represents revised data.

Case #2: Benchmark your performance...

Compare your company’s performance against industry averages obtained using data from Statistics Canada's Manufacturing Industries of Canada: national and provincial areas (Catalogue No. 31-203-XPB).

The owner of Joel’s Fine Men's Clothing Inc. in Valleyfield, Quebec needs to compare his company's progress with his competitors. Currently, he is trying to reduce his miscellaneous expenses and cannot justify spending thousands of dollars on a private market research study. Using self-produced ratios, he compares his costs of production (i.e. wages, fuel and materials) to shipments against the overall men and boys' clothing contractors in the province of Quebec. Here are the results:

Source: Statistics Canada, Manufacturing, Construction and Energy Division

The following ratios indicate:

Joel noticed that even though his company pays higher than average industry wages and salaries, his wages to shipments ratio was below the industry ratio. His fuel to shipment ratio is almost half the industry ratio as well. This finding indicates to Joel that his capital expenditure on energy conservation measures has been successful. The ratio that most concerned Joel was the materials to shipments ratio because it was considerably higher than the overall industry ratio. Joel consulted his senior managers to find a way to reduce these costs by 20 percent. It was decided that rather than compromising the company's product quality they would seek out new suppliers of cotton in North Africa and of wool in Central Asia. This type of information from Statistics Canada is useful for any company wanting to measure their performance characteristics against their specific industry.

Manufacturing Construction and Energy Division (MCED) Surveys: What information is available?

Statistics Canada collects data on all of the 22 manufacturing major industry groups through three primary business surveys:

• The Annual Survey of Manufactures (ASM)
• The Monthly Survey of Manufacturing (MSM)
• The Quarterly Business Conditions Survey

The survey information we compile is published in both print and electronic formats and is accessible in a variety of media.

The Annual Survey of Manufactures is a large survey that compiles data from over 35,000 establishments, in over 230 different Canadian industries for our principal publication Manufacturing industries of Canada: national and provincial areas (Catalogue No. 31-203-XPB, $68 Cdn). It is a census of all employers earning revenues in excess of $30,000. Since it depends on the financial records of an entire year and many variables are collected, the results are released approximately eighteen months after the end of the reference year. Important operating statistics include: total revenues, value of shipments, employment, wages, inputs, non-manufacturing activity and specific commodity information on inputs and outputs shipped. Additionally, if you need detailed industry statistics or commodity statistics, the Annual Survey of Manufactures is for you.

Businesses use information from this survey to analyze their market share, to forecast, and to benchmark performance to industry standards.

The Monthly Survey of Manufacturing (Catalogue No. 31-001-XPB) is designed to capture a snapshot of current economic conditions. This survey samples a select number of establishments who represent all of the other manufacturing establishments. By surveying only a representative sample, cost and response burden are reduced, and timeliness of the publication is improved. For example, current economic indicators are collected each month and become available six weeks after the data are collected.

The value of shipments, inventories, unfilled and new orders is presented by month, including monthly figures for the previous 12 months. Seasonally adjusted data is available at the two-digit Standard Industrial Classification (SIC) level, by province, for all manufacturing industry shipments. In order to facilitate making geographical comparisons of economic activity, shipments by major group and province (not seasonally adjusted) are available as well. This publication includes current months and corresponding previous year data and shows month to month percentage changes, and annual data with dollar and percentage changes. Information from this survey is widely used by manufacturers and other organizations because of its accurate manufacturing shipment information. This publication costs $20 Cdn per issue and $196 Cdn for a one year subscription.

When to use annual as opposed to monthly manufacturing data

In order to improve Monthly Survey of Manufacturing (MSM) estimates, Annual Survey of Manufactures' (ASM) levels from previous years are used in a process called benchmarking. In a typical period, the MSM projects monthly estimates for the current and past year. However, for the benchmark year (two to three years ago) the MSM monthly values of manufacturing shipments add up to the ASM annual totals for manufacturing shipments. While the ASM has a much broader number of variables than the MSM, the monthly survey provides more current data.

Quarterly Business Conditions Survey

Four times each year, Statistics Canada surveys the opinions of the manufacturing industry regarding the expected change manufacturers anticipate over the next three months. Opinions are collected regarding expected changes in production and employment, the present state of finished product inventories, orders received, the backlog of unfilled orders and impediments to production such as labour and material shortages, working capital and other non-specified categories. Look for the survey results during the first week of February, May, August and November.

Financial and market analysts are key users of the surveyed opinions. The results from the Business Conditions Survey are primarily released in the form of a "Balance of Opinion". A positive "Balance of Opinion" indicates anticipated growth in the economy in the current quarter, while a negative balance signals a potential downturn.

The following graph illustrates the number of manufacturing paid workers from the Labour Force Survey to the third quarter of 1999 and the Balance of Opinion from 1990 to the end of the second quarter of 1999. The balance of opinion concerning employment opportunities for the next three months among manufacturers represented a modest three-point increase from April’s survey. The percentage of manufacturers stating they would decrease their workforce was at 12%, while those stating they would increase employment levels remained at 16%.

Reports and Publications

The following industry review reports provide in-depth analysis of major industrial groups. "http://www.statcan.ca/cgi-bin/downpub/freepub.cgi"

Recent research reports  "http://www.statcan.ca/cgi-bin/downpub/research.cgi"

• Logging Industry (Catalogue No. 25F0002MIE)
• Destination of Shipments 1984 – 1993 (Catalogue No. 31F0026MIE95001)
• Destination of Shipments, 1996 (Catalogue No. 31F0026MIE96001)
• Comparison of Establishment Group in the Manufacturing Sector, 1985 – 1996 (Catalogue No. 31F0027MIE96001)
• Overview of Packaging Products used by Canadian Manufacturing Industries (Catalogue No. 31F0027MIE96002)
• Stages of Processing and Economic Trends in the Manufacturing Sector, 1988 – 1996 (Catalogue No. 31F0027MIE96003)
• The Evolution of Production costs in the Manufacturing Sector (Catalogue No. 31F0027MIE95001)
• Canadian Manufacturing Activity: A Geographic Perspective (Catalogue No.31F0028XIE)
• The Structure of Manufacturing in Canada (Catalogue No. 31F0029XIE)

To order: "http://www.statcan.ca/english/search/ips.htm"