The Monthly Survey of Manufacturing from Statistics Canada painted a bleak picture of December’s economic activity, suggesting caution for those expecting a quick recovery.

“Just as signs of a bottoming in the U.S. manufacturing sector are popping up, Canadian factories have given a frosty reminder that any recovery will be rocky,” says BMO Nesbitt Burns. “Canadian manufacturing shipments and orders were well below market expectations in December, dropping 1.8% and 2.5%, respectively. The declines were spread across a majority of sectors, with 15 of 21 industries reporting setbacks in the month. Chemical products, fabricated metals, and paper were notably weak.”

BMO also notes that the drop in orders cut into the backlog of unfilled orders by 1.5%, and inventories only dropped 0.4% , so the inventory-to-shipments ratio rose to 1.56, just slightly below the cycle-high of 1.57 reached in October. For 2001, shipments fell 5.2%, following a 9.2% rise in 2000.

“This weak report will undoubtedly unleash a wave of commentary to the effect that the Canadian turnaround is lagging the U.S. recovery,” BMO says. “However, the results are somewhat stale, and the U.S. manufacturing sector was also still struggling in December (factory output was down 0.4%). Moreover, Canadian domestic spending remains red hot, especially for homes and cars, even if exports remain on the soft side.”