Question Period Note: Monthly Survey of Manufacturing October 2021

• Nominal sales of manufactured goods rebounded 4.3% in October, following a 2.8% decrease in September. This increase was in line with market expectations of 4.1% growth.
• In real (i.e., inflation-adjusted) terms, manufacturing sales grew 3.1%, following a 4.1% decrease in September.

• Today’s manufacturing data shows resiliency in the auto industry to ongoing supply chain challenges.
• Still, some businesses continue to face hardship as a result of the pandemic and global supply chain challenges.
• Achieving a full recovery will take time but the government is determined to do what is necessary to finish the fight against COVID-19, accelerate the recovery, and set the stage for strong, sustained growth for years to come.

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• Bottom line: Overall, a positive report, as both nominal and real manufacturing sales increased notably in October. A rebound in motor vehicles sales (surging 61.0% following a 35.8% drop in September) accounted for most of the increase in real sales in October.
• Sectoral and Regional Breakdown: Gains were led by motor vehicles (+61.0%) and motor vehicle parts (+23.1%). Primary metals (+4.0%, due to an all-time high in aluminum sales), chemical products (+3.7%, due to strong demand for fertilizer and agrochemical products), and plastic and rubber products (+5.1%) also saw solid gains. However, aerospace production fell by 8.3%, leaving aerospace manufacturing at 40% below pre-pandemic levels. Sales grew in 6 provinces, led by Ontario (+8.6%, mostly from motor vehicle sales) and Alberta (+2.9%), with New Brunswick seeing a loss of 3.6%.
• Recovery Path: Manufacturing sales volumes remain 7.4% below pre-pandemic levels, though nominal sales, at 7.7% above pre-pandemic levels, have been supported by solid price gains. Recovery in manufacturing has been fairly broad-based, with sales at or above pre-pandemic levels in 16 of the 21 sub-industries. However, notable weakness remains in transportation, non-metallic minerals and clothing.
• Spare Capacity: Manufacturers operated at 77.1% (not seasonally adjusted) of their production capacity in October, lower than the 80.5% seen in October 2019, suggesting that some slack remains in the manufacturing sector.
• Looking Forward: Despite this month’s strong rebound, auto manufacturers are likely to continue to be hobbled by semiconductor supply chain disruptions, with ongoing shortages expected until mid-2022. The Labour Force Survey saw a further increase in total hours worked in the manufacturing sector in November (1.7%), which could indicate a continuation of October’s strong performance.