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Winnipeg Free Press - PRINT EDITION

Factory-output decline new sign of global chill

By: Julian Beltrame

Posted: 06/16/2012 1:00 AM | Comments: 0

OTTAWA -- Production at Canada's factories fell for the third time in four months in April in yet another signal the global slowdown is starting to hit the domestic economy.

Statistics Canada reported Friday manufacturing sales declined 0.8 per cent to $49.1 billion over the month, partly reversing March gains.

Manitoba was one of seven provinces to post a drop in sales, with factories shipping out $1.28 billion worth of goods during the month, down 1.3 per cent from March's total of just under $1.3 billion.

The decline was the second-smallest among the provinces that saw weaker sales, and followed a 0.2 per cent increase in March.

Despite the poorer month-to-month showing, Manitoba's April total was still a 3.7 per cent improvement from a year earlier, when $1.24 billion worth of goods were sold.

Analysts, who had expected a slight increase nationally, said the soft number suggests the second quarter of 2012 got off to a rocky start after a below-expectations gain of 1.9 per cent in first three months of the year.

Forward-looking indicators were not much better, with new orders falling 3.2 per cent and unfilled orders flat.

"(This) does not bode well for overall economic growth," said Dina Ignjatovic, an economist with TD Bank.

"And it (manufacturing) will continue to face a great deal of headwinds in the near term as economic activity around the world has slowed, confidence has soured and the Canadian dollar remains elevated."

Analysts are divided about just how strong 2012 will be. Earlier this week, the Royal Bank said it still expects policy-makers to prevent a European financial meltdown, paving the way for a relatively robust 2.6 per cent expansion in Canada.

But the Organization for Economic Co-operation and Development has estimated even without a European crisis, 2.2 per cent growth would be a good performance in Canada given weakness in the rest of the world. Some analysts think Canada will be fortunate to top two per cent.

In a speech in Ottawa, Finance Minister Jim Flaherty said Canada is as prepared as reasonable for a shock, although that doesn't mean the country is "immune."

And he said despite critics who blame manufacturing's decline on a strong currency caused by resource exports -- so-called Dutch disease -- there is evidence riches from the oilsands are being spread across the country.

He referred the Canadian Association of Petroleum Producers estimate the oil industry would add $63 billion to the economy in Ontario over the next 25 years due to demands for goods and services, and another $14 billion to Quebec and $2 billion to Atlantic Canada.

"My point is that a rising tide lifts all boats," he said in notes released to the media. Listing off a number of resource projects around the country, he said "all (are) great opportunities for our country to grow and prosper over the next generation."

In a report earlier this week, the OECD said there is little doubt resource riches are accruing primarily to Western Canada and hurting currency-sensitive industries such as manufacturing and tourism elsewhere.

For the second quarter, CIBC economist Emanuella Enenajor noted some important data still need to be confirmed, particularly next week's wholesale and retail trade figures, before April's picture comes into focus.

But she conceded the factory performance raised doubts the month would show the rebound many had hoped for after the weakness of the first three months.

-- The Canadian Press, with files from staff

Republished from the Winnipeg Free Press print edition June 16, 2012 B13

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