According to Statistics Canada, manufacturing sales fell 9.2 percent to $50.8 billion in March, the lowest level since June 2016 and the largest percentage decline since December 2008, during the previous recession.
Manufacturing sales in March were substantially affected by COVID-19 as many plants were shut down or faced sharply lower demand during the last two weeks of the month. Given ongoing lower demand, together with continued challenges to global supply chains and ongoing physical distancing measures, the March decline in sales is expected to continue into April.
Sales were down in 17 of 21 industries, led by steep declines in the transportation equipment and petroleum and coal product industries. In contrast, sales were up in food, paper, as well as the beverage and tobacco industries.
In volumes terms, manufacturing sales fell 8.3 percent, indicating that a lower volume of products was sold in March.
Over three-quarters (78.3 percent) of establishments in the manufacturing sector reported that their activities were impacted by COVID-19. Furniture and related product (91.2 percent), miscellaneous (88.9 percent) and transportation equipment (88.3 percent) industries reported supply issues, with some shutting down several plants in response to lower global demand or in response to physical distancing requirements.
Based on respondent feedback, the largest estimated impacts of COVID-19 on manufacturing sales in dollar terms were in the transportation equipment (-$2.9 billion), fabricated metal product (-$376 million), petroleum and coal product (-$331 million), machinery (-$295 million), plastic and rubber product (-$277 million) and primary metal (-$219 million) industries. It should be noted that these estimated impacts are on an unadjusted basis and should be interpreted with caution. However, they provide an estimate of the magnitude to which COVID-19 may have lowered sales.
Inventory levels edged up 0.1 percent to $87.5 billion in March. Inventories rose in 13 of 21 industries, led by the transportation equipment industry (+5.3 percent). This was mostly offset by lower inventories in the petroleum and coal product industry (-20.7 percent), as prices for crude oil and refined products fell sharply in March.
The inventory-to-sales ratio increased from 1.56 in February to 1.72 in March, mostly due to lower sales. This was the largest monthly increase in the inventory-to-sales ratio since December 2008. This ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.
Unfilled orders decreased 0.4 percent to $96.8 billion in March. The decline was mainly attributable to lower unfilled orders in the transportation equipment (-0.9 percent) and machinery (-3.5 percent) industries.
These declines were partially offset by higher unfilled orders in the fabricated metal product (+3.2 percent) and chemical (+18.6 percent) industries.
New orders fell 11.3 percent to $50.4 billion in March, mostly reflecting lower new orders in the transportation equipment (-38.5 percent) and the petroleum and coal product (-32.1 percent) industries.
The unadjusted capacity utilization rate for the manufacturing sector declined 3.6 percentage points to 72.8 percent in March. This was 8.8 percentage points lower compared with March 2019.
The capacity utilization rate for the transportation equipment industry fell 17.7 percentage points to 65.1 percent in March. The decrease was mostly attributable to lower production at motor vehicle assembly and motor vehicle parts plants associated with the two-week shutdown at the end of March.
The capacity utilization rate of the petroleum and coal product industry declined for the third consecutive month, falling 11.8 percentage points to 65.1 percent in March. The decrease was attributable to lower production across the country due to lower demand and shutdowns at some refineries.