Source: Statistics Canada

Manufacturing shipments rebounded from a sharp&nbsp ; 2.0% drop in June, gaining&nbsp ; 2.3% to&nbsp ; $50.0&nbsp ; billion in July, the highest level since March. Most of the strength in July came from a return to more normal shipment levels by motor vehicle manufacturers following a sharp decrease in June.

Manufacturing shipments have been heavily influenced by fluctuations in the transportation equipment industry over the past several months. Excluding the motor vehicle and parts industries, shipments advanced&nbsp ; 0.4% in July for the fifth gain in the last six months.

Using constant dollars, which take price fluctuations into account, the volume of manufacturing shipments increased&nbsp ; 4.3% to&nbsp ; $46.1&nbsp ; billion. This was the eighth increase in the past ten months, pushing the volume of shipments to the highest level since December&nbsp ; 2005. Additionally, the&nbsp ; 4.3% jump was the largest increase in almost four years.

Although the bulk of the increase in July came from transportation equipment manufacturers, on an industry-by-industry basis,&nbsp ; 12&nbsp ; of the&nbsp ; 21&nbsp ; manufacturing industries increased in July, representing about&nbsp ; 63% of total shipments.

Durable goods manufacturers reported a&nbsp ; 3.7% increase in shipments, the first increase in four months. The transportation equipment industry accounted for most of the gains. Shipments of non-durable goods were up&nbsp ; 0.7%, gaining for the fifth time in six months as petroleum and coal shipments resumed their upward march.

New orders advanced for the first time in three months, gaining&nbsp ; 3.2% and jumping to a record high in July. Unfilled factory orders continued to mount, increasing&nbsp ; 2.9% compared to June.

Motor Vehicle Industry Bounces Back
The motor vehicle industry rebounded&nbsp ; 17.6% in July to levels more in line with norms and that more properly reflect timing shifts associated with summer plant shutdowns. Over the first seven months of&nbsp ; 2007, motor vehicle shipments were&nbsp ; 0.7% higher than in the same period in&nbsp ; 2006.

Petroleum and coal product manufacturers reported a&nbsp ; 3.2% increase in shipments in July. This was the fifth increase in the past six months, and brought shipments to the highest level since August&nbsp ; 2006. After weakening in the second half of&nbsp ; 2006, petroleum and coal shipments have been trending upwards throughout&nbsp ; 2007.

On the down side, primary metal shipments lost ground for the second time in three months, dropping&nbsp ; 2.6%. Prices dropped&nbsp ; 3.8%, plus a labour dispute at a major primary metal factory, though resolved by the end of the month, negatively impacted shipments in July.

By Province
Provincial manufacturing results were evenly split between gains and losses in July. However, the resurgence in Ontario’s transportation equipment industry helped to pull shipments up as a whole.

Ontario reported a strong&nbsp ; 5.2% jump in shipments after decreasing&nbsp ; 3.9% in June. The transportation industry, which accounts for over&nbsp ; 30% of Ontario’s manufacturing base, rebounded&nbsp ; 14.6% in July following three months of decline capped by a&nbsp ; 9.5% plunge in June.

Nine of Canada’s top ten motor vehicle manufacturers are located in Ontario.

Some of the gains in Ontario were offset by a downturn in neighboring Quebec. Shipments decreased for a third consecutive month, giving up most of the gains reported earlier in the year. Quebec’s shipments of transportation equipment did not experience the same rebound as those in Ontario, dropping&nbsp ; 3.5% for the third decrease in four months.

Primary metal manufacturers in Quebec also reported poor shipment results in July, down&nbsp ; 8.0%. A month-long strike at a major plant, combined with a&nbsp ; 3.8% drop in primary metal prices, were leading contributors to this decline.

Newfoundland and Labrador reported a sharp&nbsp ; 12.3% drop in shipments in July, largely due to a sizeable&nbsp ; 42.1% downturn by food manufacturers. Seafood product preparation and packaging manufacturers led the decline in the province’s food industry. Despite July’s overall drop, provincial shipments were&nbsp ; 50.5% higher than a year ago.

Unfilled Orders Surge
Unfilled orders gained&nbsp ; 2.9% to&nbsp ; $51.6&nbsp ; billion in July, for a&nbsp ; 10th consecutive monthly increase. The trend for unfilled orders has been steadily improving since last summer, which was preceded by a one-year period of relative stability. Unfilled orders may be considered an indicator for future shipments, assuming orders are not cancelled.

Aerospace products and parts, due to the long-term nature of manufacturing in this industry, accounted for about&nbsp ; 44% of total unfilled orders and continued to lead the upward march in July.

Aerospace product manufacturers reported a&nbsp ; 4.3% or&nbsp ; $930&nbsp ; million increase in unfilled orders, largely due to continued demand for regional jets and turboprops. Unfilled orders in the aerospace industry have increased a substantial&nbsp ; 60.6% compared to July&nbsp ; 2006.

Excluding aerospace products and parts, unfilled orders increased a more modest&nbsp ; 1.8% compared to June, and&nbsp ; 6.0% compared to July&nbsp ; 2006. Miscellaneous manufacturers reported a&nbsp ; 26.6% surge in unfilled orders in July, largely because of strength in medical equipment and supplies as well as jewellery and silverware manufacturing.

Computer and electronics manufacturers (+3.6%) and machinery manufacturers (+1.9%) also reported a rise in unfilled orders.

New Orders Jump
After two months of losses, new orders increased&nbsp ; 3.2%, reaching an all-time high of&nbsp ; $51.4&nbsp ; billion in July.

The transportation equipment industry provided most of the boost to new orders in July. Motor vehicle manufacturers saw a&nbsp ; 17.8% jump, and aerospace products and parts manufacturers were up&nbsp ; 13.1%. As a whole, new orders in the transportation equipment manufacturing industry were up&nbsp ; 9.4% or&nbsp ; $888&nbsp ; million. Computer and electronic product manufacturers also surged&nbsp ; 20.9% or&nbsp ; $284&nbsp ; million.

Primary metal was one of the few industries with new orders dropping, losing&nbsp ; 2.2% or&nbsp ; $98&nbsp ; million compared to June.

Inventory
Inventory levels edged up&nbsp ; 0.2% to&nbsp ; $63.1&nbsp ; billion in July. The increase was due to a&nbsp ; 1.5% jump in raw material inventories, as both goods-in-process and finished-product inventories were drawn down during the month. After increasing slowly throughout&nbsp ; 2006, inventories have remained fairly stable during&nbsp ; 2007, increasing only&nbsp ; 0.4% since the start of the year.

Only&nbsp ; 10&nbsp ; of&nbsp ; 21&nbsp ; industries reported an increase in their inventories in July, led by a&nbsp ; 5.3% gain in the petroleum and coal industry. Inventory levels in this industry have increased&nbsp ; 20% since December&nbsp ; 2006.

Chemical manufacturers also reported rising inventories (+1.6%) in July. These inventories rose for five consecutive months, largely due to pharmaceutical manufacturers who introduced a number of new product lines over the past year.

Primary metal manufacturers offset some of the increases, reporting lower inventories for the fourth time in the past five months. Inventory levels peaked at almost&nbsp ; $7&nbsp ; billion in December&nbsp ; 2006, before tapering off to&nbsp ; $6.6&nbsp ; billion in July.

Inventory-to-Shipment Ratio Down
With shipments rebounding following the drop in June and inventory levels remaining fairly steady, the inventory-to-shipment ratio decreased in July to&nbsp ; 1.26. With the exception of the blip in June (1.29), the inventory-to-shipment ratio has been steady at&nbsp ; 1.26&nbsp ; since April.

The inventory-to-shipment ratio is a measure of the time, in months, that would be required to exhaust inventories if shipments were to remain at their current level.

Details by sector, province