courtesy GM Oshawa Click image to enlarge

After a tumultuous 2020, where manufacturing sales fell to their lowest levels since 2015, a rebound in 2021 saw manufacturing sales reach their highest level on record, according to Statistics Canada.

This reflected higher domestic and international demand as economies began to re-open.

However, 2021 was also marked by significant supply chain issues, such as shortages of microchips, plastic resins and petrochemicals, and other raw materials, as well as increases in the price of metals, wood products and foods. This led to a pronounced resurgence of inflation which pushed up the price of raw materials as well as intermediate goods used in production, both of which were reflected in the higher value of manufacturing sales and inventories.

Total manufacturing sales in current dollars increased 17.5% to $718.4 billion in 2021. The primary metal industry did particulary well with sales increasing 40.7%. Overall, sales increased in 20 of 21 industries, with transportation equipment being the only industry to post a decline (-10.4%).

Manufacturing sales in constant dollars were up 4.2% to $597.0 billion in 2021, with 15 of 21 industries posting higher sales following a 10.3% decline in 2020. Volume sales in the transportation industry fell the most, declining 9.4% to 77.6 billion in 2021, on lower sales of motor vehicle (-18.8%) and aerospace product and parts (-8.9%). Motor vehicle and part production has been impacted by the global semiconductor chip shortage, while travel restrictions led to production slowdowns in the aerospace product and parts industry.

Regionally, manufacturing sales in current dollars increased in every province in 2021. Sales increased in Ontario (+11.3%) and Quebec (+19.5%)).

Year-end inventory levels in 2021 grew 18.9% to $102.8 billion compared with 2020, mostly on higher inventories of primary metal (+28.8%), petroleum and coal (+42.9%), and machinery (+24.5%) industries. Supply chain disruptions led to higher prices of raw materials in many industries and resulted in this increased value of inventory stocks in 2021. The share in total inventories of both raw materials and finished products have been increasing since the onset of the COVID-19 pandemic, while the share of goods in process has declined.

The primary metal industry continued its growth since the onset of the pandemic, reaching its highest level on record in November of 2021, at $5.8 billion. Current dollar sales were up 40.7% in 2021, mainly on higher prices, as constant dollar sales increased 2.3%. More specifically, the prices of iron, steel and aluminum have been affected by rising demand, higher prices of natural gas and lower production in China. Average prices for primary ferrous metal products were up 43.4% in 2021, while average prices of primary non-ferrous metal products were up 21.6%.

Transportation equipment industry shrinks

The transportation equipment industry posted the only annual decline (-10.4%) among all 21 manufacturing industries. Motor vehicle was the largest contributor to this decline, down 18.1% to $36.6 billion in 2021. The worldwide shortage of semiconductor chips constrained activity in the motor vehicle and part industries as temporary shutdowns and the ramping down of production occurred throughout the year at auto assembly plants and, as a result, many auto part manufacturers correspondingly reduced their production. Total exports of motor vehicle and parts declined 4.3% in 2021 accordingly. The aerospace product and parts industry, which was impacted by pandemic-related travel restrictions, posted a 13.8% decline in production in 2021 as aircraft manufacturers faced lower demand coupled with production disruptions. Overall, the aerospace product and parts industry also posted the largest decline in inventories, down 10.3% year over year.

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