According to Statistics Canada, manufacturing sales rose 3.1 percent to $56.2 billion in January, following a 1.3 percent gain in December. Sales were up in 16 of 21 industries, driven mainly by the wood product, computer and electronic product, and primary metal industries. Motor vehicle manufacturing posted the largest decline.
In the primary metal industry, sales increased for the fourth consecutive month, rising 6.0 percent to $4.2 billion in January—the highest level since June 2019. The iron and steel mills and ferro-alloy manufacturing industry was responsible for the increase. On a year-over-year basis, sales were up 7.9 percent. In real terms, sales of primary metal products rose 3.9 percent, indicating that both prices and sales volumes increased in January.
Following a 1.2 percent increase in December, motor vehicle sales fell 8.2 percent to $3.9 billion in January, the lowest level since May 2020. The worldwide shortage of semiconductor chips affected the motor vehicle industry across North America and halted production in many auto assembly plants in Ontario. The lack of chips is expected to further reduce vehicle production in the first quarter of 2021.
The chip shortage also affected many auto part makers, and sales of motor vehicle parts decreased 3.5 percent to $2.5 billion in January. Some auto part manufacturers had to reduce production or shut down operations in January.
Following a 0.6 percent decline in December, total inventories rose 1.9 percent to $88.3 billion in January on higher inventories of chemicals (+6.2 percent), plastics and rubber products (+7.7 percent), and transportation equipment (+1.3 percent). The gains were partially offset by lower inventories of electrical equipment, appliances and components (-8.8 percent), and beverage and tobacco products (-4.4 percent). Total inventory levels in January were down 0.4 percent year over year.
The inventory-to-sales ratio decreased from 1.59 in December to 1.57 in January. This ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.
Following a 0.4 percent gain in December, unfilled orders rose 2.3 percent to $87.5 billion in January on higher unfilled orders in the transportation equipment (+2.0 percent) and primary metals (+14.2 percent) industries. The machinery industry posted the largest decline (-2.3 percent).
The total value of new orders increased 6.1 percent to $58.2 billion in January, up 3.4 percent year over year and the highest level since August 2019. The transportation equipment industry contributed the most to the gains in January. New orders of motor vehicles declined 8.7 percent.
The capacity utilization rate (not seasonally adjusted) for the total manufacturing sector increased from 75.7 percent in December to 76.8 percent in January because of higher production.
Capacity utilization rates rose in the petroleum and coal product (+4.8 percentage points), chemical (+4.6 percentage points), machinery (+2.7 percentage points), and primary metal (+1.9 percentage points) industries. The production capacity utilization rate in the transportation equipment industry fell 5.2 percentage points in January on lower production at car assembly plants in Ontario because of the semiconductor chip shortage.