By James Langton
(November 2) – Two recent reports cast doubt on the prospects for the Canadian economy. Both reports show that manufacturers’ confidence may be weakening.
Statistics Canada has released its Quarterly Business Conditions Survey. The survey is essentially the Canadian equivalent of the influential U.S. National Association of Purchasing Managers index. StatsCan reports that in October, production and employment prospects for the fourth quarter remained positive, but a growing number of manufacturers reported concern with the current level of orders.
Manufacturers were still positive about production prospects, but slightly less than they were in the previous three surveys. Concern about the current levels of new and unfilled orders continued to increase. Even so, they did not expect this to lead to reductions in employment levels during the fourth quarter.
According to Dr. Sherry Cooper, chief economist at BMO Nesbitt Burns, “Canada’s economic engine is still purring, but one key cylinder may be about to misfire. Manufacturers are growing increasingly concerned about the outlook, largely due to the slowdown in U.S. activity.”
Cooper says that every component of the BMO Nesbitt Burns Business Conditions Index slipped in the quarter, with the biggest slides in new orders and the backlog of unfilled orders. Primary metals and transportation is particularly weak. She says that despite reports of labour shortages by the Bank of Canada and the Conference Board, only 8% of firms reported this problem in the latest quarter.
“This report drives home the point that Canadian manufacturing is not immune to a U.S. slowdown. However, we still believe that consumer spending, business investment, and housing activity will propel the overall Canadian economy to another solid gain in 2001.”