Industrial shipments slipped 0.2% in January to $45.5 billion, but manufacturers saw new orders rise for the second consecutive month and inventories were up, Statistics Canada said this morning.

New orders jumped 2.5% to $46.4 billion in January, following a healthy gain of 2.1% in December, the agency said Tuesday. “An indication of future production, new orders are at the highest level since October 2002,” StatsCan said.

The backlog of unfilled orders rose 2.6% to $35.8 billion, the first increase since September.

“Inventories rose 0.5% to $58.6 billion in January. This is only the second increase in inventories since their recent high of $61.8 billion in April 2003.”

Thirteen of 21 manufacturing industries surveyed, accounting for 43% of total production, reported decreased shipments in January. The decline was concentrated in the big-ticket, durable goods sector.

RBC Financial says that markets had anticipated a larger decline in manufacturers’ shipments given January’s weak manufacturing-centred export figure, which showed a 4.7% drop. “Life may not be all rosy for Canada’s manufacturers, but in light of last week’s dire merchandise trade report, this morning’s data on manufacturing activity could have been worse, much worse — and there were even a couple of visible bright spots in today’s data,” says TD Bank.

“All told, while it is clear that Canada’s struggles on the export front are still bogging down the manufacturing sector – and will likely continue to do so for some time – a full-blown carnage it is not, and today’s data certainly do suggest that there is a flicker of light at the end of the tunnel,” says TD.

“Today’s report is on balance better than expected. While shipments were off, they were nowhere near as weak as the trade numbers suggested, and orders are showing real signs of strength,” comments BMO Nesbitt Burns. “After largely treading water for the past 18 months, manufacturing is poised for moderate growth, provided the U.S. economy stays on track and the Canadian dollar does not take off again.”

“On balance, today’s report alone will not have much of a bearing on the Bank of Canada’s interest-rate decision on April 13th. However, as we indicated last week, the sour merchandise trade and employment reports have materially increased the odds of an interest-rate cut next month, and today’s data have done nothing to alter that reality,” TD concludes. “Ultimately, the Bank’s decision will hinge heavily on upcoming economic releases. Next in line — Thursday’s CPI data.”