Manufacturers under pressure as demand rises

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This article was published 28/04/2022 (1603 days ago), so information in it may no longer be current.

At yesterday’s annual meeting of the Manitoba chapter of the Canadian Manufacturers and Exporters association, Michael Swistun, head of the province’s newly formed economic development secretariat, said “the global economic winds are in our favour.”

Swistun was referring to an influx of interest from potential national and international players in large-scale value-added resource development projects, many associated with decarbonization who are attracted here by the stable political environment, the cheap, green and plentiful hydroelectricity and bountiful natural resources, especially stuff like nickel and lithium for the production of batteries.

The problem is, these days those economic winds are blowing a bit too hard.

Supply chain issues, labour shortages, inflation are all wearing down manufacturers at the same time as they are experiencing strong demand and deep order books.

Swistun is talking about high-level investment interest that takes place a long time before any cheques are written. Part of his job now is to help those potential investors deal with infrastructure deficits and navigate their way through the regulatory process.

Meanwhile, it turns out the Manitoba manufacturing sector is feeling even more beleaguered than the national average.

Alan Arcand, the Ottawa-based chief economist for the national CME organization, said a recent survey the organization did showed elevated levels of concerns in Manitoba over labour shortages, supply chain problems and even vaccine mandates, all of which were higher in Manitoba than the national averages.

Arcand has a few ideas about why that might be the case.

For one thing, when it comes to the supply chain, Manitoba manufacturers were disproportionately concerned about the trucking industry, whereas the rest of the country blamed trans-Pacific logistics business.

Arcand figures that’s likely because the trucking industry has a larger footprint in Manitoba, representing about two per cent of the total employment in province which is about 66 per cent higher than the national average.

He also believes labour shortages in Manitoba have recently been exacerbated by the combination of Manitoba’s chronic problem with out-migration along with the decline in immigration caused by the pandemic.

He figures it’s likely that the trucker blockade over vaccine mandates had a greater impact in Manitoba because of trucking’s prominence in Manitoba.

Despite all that industry leaders say it is not hard to continue to be optimistic. The provincial industry boasted $20 billion in sales in 2021. Nationally, manufacturing sales are up 20 per cent above pre-pandemic levels.

Todd LeRoy, vice-president of manufacturing at Loewen Windows, said labour shortages are spurring new investment in automation. Chad Brick, president of the Eastside Group of Companies, said while people may think things are bad here, conditions are much worse for manufactures in the U.S.

Arcand showed that even though inflation has not been this high since 1991 when the GST was introduced and interest rates may be on the rise — and he believes they will keep rising with another 50 basis point bump by the Bank of Canada in June — rates are still nowhere near the double digit levels of the 1980s.

But labour shortage is definitely a big problem for Manitoba manufacturers with 1,800 manufacturing job vacancies here in the fourth quarter of 2021 which is 50 per cent higher than the previous high of the past seven years. And to make matters worse there is less than one job seeker for every one of those vacancies.

Swistun and Cliff Cullen, the minister of economic development, investment and trade, who also was there to encourage the industry, spoke about the government’s renewed belief in economic development — including a $100-million commitment to skills development in the latest budget and emphasis on getting immigration numbers back to pre-pandemic levels.

Manufacturers in Manitoba also enjoys support and collaboration from the CME, one of the most engaged and effective industry associations around.

In June it is hosting a conference on lean manufacturing, the largest event of its kind in the country.

But while companies struggle to get the parts and recruit workers needed to fill their orders, the challenging conditions remain.

Arcand noted there are further COVID-19 lockdowns in China and suggested supply-chain disruptions are likely to persist.

It’s weird comfort, but Arcand said the fact that consumers are now rotating back to services with restaurant sales coming and people are starting to travel again, “You will see slower demand for those goods that manufacturers make which will relieve some of the pressure.”

The opportunities will come from the fact companies are looking to re-shore after witnessing how fragile the global supply chain is.

Manitoba can attract more manufacturing investment but in order to take advantage of those opportunities it needs to get more people working.

martin.cash@freepress.mb.ca