Canadian manufacturing shipments and orders came in strong in January. “After a particularly harsh year for Canadian manufacturers in 2001, it appears that brighter days may be coming faster than expected for the battered sector,” say TD Bank economists.

In January, Canadian manufacturing shipments rose 3.1%, following a string of declines in the last three out of four months. And 18 of 21 industries reported gains in their shipments in January.

Manufacturers also continued to cut inventories for the eighth consecutive month, bringing the level of inventories to 1.49 months worth of shipments in January. The first time the inventory-to-shipments ratio dipped below the 1.50 mark in nine months, says TD.

New orders were even stronger than shipments in January, posting a 3.9% increase, observes BMO Nesbitt Burns. “However, orders have been on a see-saw for the past year, and are still down from year-ago levels. The backlog of unfilled orders fell for the sixth consecutive month, but this is a lagging indicator.”

“The surge in shipments comes amid numerous signs that the North American economy is finally finding its feet, and is good news for Canadians laid off in 2001,” say economists at RBC Financial. “With the manufacturing sector adding another 62,000 new jobs in February – its second gain in a row – and the U.S. economy back in business, the factory sector should enjoy some better news in the first half of 2002. The 3.9% jump in new orders in January is another sign in this direction.

“This is a strong report from wall to wall,” says BMO. “While the manufacturing data are notoriously volatile, the latest surge adds to encouraging signs from factory payrolls and U.S. industrial production. The overall picture suggests that Canadian manufacturing is recovering.”