Manufacturing takes steepest tumble on record, investment flows slosh homeward

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TORONTO - Sales by Canadian manufacturers have taken their steepest tumble in at least 17 years, falling for a fifth straight month amid wretched times in the energy and automotive sectors - and there may be worse to come.

TORONTO - Sales by Canadian manufacturers have taken their steepest tumble in at least 17 years, falling for a fifth straight month amid wretched times in the energy and automotive sectors - and there may be worse to come.
Statistics Canada said Monday that December's 8.0 per cent decline to $44.2 billion accelerated from November's revised 6.2 per cent pullback.
It was the largest sag in manufacturing sales since the agency began compiling the data in the current form in January 1992, and it put monthly sales nine per cent below December 2007.
For all of 2008, the value of sales adjusted for inflation declined 0.5 per cent to the weakest level since 2005.
''The bad news just keeps on coming for Canada's economy, with another record decline being beaten,'' commented Desjardins Group economist Benoit Durocher.
Statistics Canada also reported large shifts of international investment during December, as Canadians pulled back billions from abroad while foreigners removed an ''unprecedented'' amount of Canadian bonds from their holdings.
The agency said Canadians' sale of $6.4 billion worth of foreign securities in December represented the fourth straight month of net divestment from other countries, reflecting global instability.
''In stark contrast to 20 consecutive years of significant portfolio investment abroad, Canadian investors reduced their holdings of foreign securities in 2008, returning funds to the Canadian economy,'' Statistics Canada noted.
Meanwhile, the Canadian Auto Workers said 2008 was Canada's worst-ever year in trade of automotive products.
The union's analysis of Statistics Canada data found the automotive trade deficit more than doubled to almost $14 billion, from $6.6 billion in 2007.
Monday's reports kept up a dreary drumbeat of dismal data, including Statistics Canada's report last Wednesday that the country had its first overall monthly trade deficit since 1976 in December as a result of the worldwide economic malaise.
That followed the tally of 129,000 jobs lost in December, which pushed unemployment to a four-year high of 7.2 per cent, a rate that is anticipated to swell.
Monday's Statistics Canada report attributed the downward jolt in manufacturing sales almost equally to decreases in volume and prices. Excluding price effects - largely in energy-related sectors - the month-to-month decline in activity was 4.4 per cent.
Sales fell in 20 of the 21 manufacturing industries the agency tracks, with printing showing the only increase, a narrow 0.1 per cent.
Sales in the petroleum and coal products industry fell 18.4 per cent to $4.4 billion. Motor vehicle industry sales skidded 14.2 per cent to $3.2 billion. Metal sales sagged 14.4 per cent to $3.5 billion.
The eight per cent overall drop - paced by a 9.2 per cent shrivelling of Ontario manufacturing and the ongoing slide of energy and metal prices - was about double what economists were generally expecting.
And the 4.4 per cent sales slump in real terms ''spotlights even deeper problems,'' Desjardins Group's Durocher said, suggesting that worse may be in store.
''It seems that the speed and magnitude of the decline has taken manufacturers by surprise, as they have not yet adjusted their inventories,'' Durocher said.
The ratio of inventories to monthly sales took its biggest one-month jump on record to 1.50, the highest level since October 2001. At the same time, new orders dropped 12.9 per cent.
''Manufacturers will therefore have to adjust over the next few months and slash their inventories,'' Durocher said.
''This should increase the decline by these industries' production.''
The investment-flow data showed Canadians sold $3.8 billion of foreign bonds in December, mostly U.S. Treasury bonds, along with net divestments of $1.7 billion of short-term money-market instruments and $961 million of stocks.
Meanwhile, foreigners offloaded Canadian securities to the tune of $2.8 billion.
Canadian Auto Workers president Ken Lewenza said the union's trade-deficit report ''confirms that Canada's unbalanced trade with Asia and Europe is a major cause of the industrial carnage we see around us today.''
However, the data also showed that for the first time Canada is running an auto-industry trade deficit within the North American Free Trade Agreement area.
The country's traditional auto trade surplus with the U.S. plunged to $4 billion, barely one-fifth the level of three years ago, and this failed to offset the long-standing auto trade deficit with Mexico, which amounted to $4.5 billion.
Meanwhile, despite flagging overall auto sales in Canada, imports from outside NAFTA kept growing to a record $15 billion, while Canadian auto-sector exports to Asia and Europe fell 30 per cent to $1 billion.
The CAW estimates the overall $14-billion deficit in auto-industry trade ''corresponds to the loss of 22,500 direct auto jobs.''

Organizations: Statistics Canada, Desjardins Group, Canadian Auto Workers U.S. Treasury

Geographic location: Canada, TORONTO, Asia Europe Ontario U.S. Mexico

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