The Business Conditions Survey is out, showing encouraging signs of recovery in the Canadian manufacturing sector in April.

Producers indicated that inventories were under control, orders were picking up and it was time to crank up production, says Statistics Canada.

Also, 82% of manufacturers indicated that finished product inventory levels were about right. One-quarter of manufacturers expected to increase output during the next three months, and 87% reported their work force would remain the same or increase.

The balance of opinion index for expected production turned positive for the first time in more than a year, note Bank of Montreal economists, as it rose to +6 in April from a revised -12 in January. “With new orders on the rise and inventories under control, more companies project higher output over the next three months. Producers of transportation equipment, primary metals and wood products reported a marked improvement in prospects. Most manufacturers reported that employment would be stable or higher in the near term.”

BMO says that the survey suggests that factory inventories were reduced in recent months, though at a slower pace than in late 2001. “This implies higher production and economic growth. We estimate that GDP grew at an annual rate of 5.5% in the first quarter compared with 2.0% in the fourth quarter, with business inventories adding roughly 2 percentage points to growth.”

The bank’s opposite numbers at BMO Nesbitt Burns say, “Canadian manufacturing has roared back to life in the opening months of 2002 from the weakest conditions in a decade at the end of last year. Our Business Conditions Index, which is based on a survey of manufacturers by StatsCan, posted its biggest quarterly advance in the 17-year history of the index.”

“This report is another strong signal that the recovery in manufacturing is real,” concludes BMO Nesbitt.

RBC Financial Group economists agree that the survey is, “another plus for the Canadian economy”.