Manufacturing shipments slipped 0.2% to $50.1 billion in December, dragged lower by falling petroleum prices, Statistics Canada said today.

In its monthly survey of manufacturing, StatsCan said Canadian manufacturers saw finished-product inventories climb to a record high in December as unfilled orders weakened steadily.

Conversely, new orders advanced 0.4% to $49.9 billion, the first increase since July.

The government agency said the strong value of the Canadian dollar, coupled with high production costs took a toll on the manufacturing sector and the fourth quarter of 2004 ended with a 0.8% drop in shipments.

This was the first quarterly decline since the second quarter of 2003, when a sharp drop in petroleum prices, a slowdown in motor vehicle manufacturing, and the start of the mad-cow crisis contributed to a 4.0% decline in manufacturing activity.

Petroleum prices, which rose steadily stating in late 2003, began to drop in November and pulled down total manufacturing shipments.

The value of petroleum shipments retreated a significant 6.3% to just over $4 billion in December. This was the first decrease in 14 months, although shipments remained 33 above levels of a year ago.

Just over half (11 of 21) of the manufacturing industries, accounting for 48% of total shipments, reported decreases in December. The decline was concentrated in the petroleum and coal products industry which pulled down shipments of nondurable goods by one% to $21.7 billion. Meanwhile, big-ticket durable goods manufacturers reported the first increase in four months, rising 0.4% to $28.3 billion.

Auto manufacturers boosted year-end production by 2.3% to $6.1 billion, largely offsetting the lower shipments in December. This was only the second increase for motor vehicle manufacturing in the last six months. Higher shipments were also reported by the beverage, paper and railroad rolling stock industries.

Separately, the StatsCan said new motor vehicles sales declined 3.1% in December after falling in November, too. As in 2003, incentives were not enough to spur sales, which fell for a second consecutive year.

After reaching a record high in 2002, new motor vehicle sales registered their second consecutive year-over-year decline in 2004.

StatsCan said new motor vehicle dealers sold 1,575,242 units in 2004, down 3.1% from 2003 and the lowest level since 1999. The drop in sales occurred despite various incentive programs.