A slowdown in machine sales in not unexpected considering the economic headwinds but the economy should bounce back quickly, CMTDA's Marc Hasrouny said. PHOTO courtesy DMG Mori.
After a strong rebound in 2021 and a fairly strong first half of 2022, Canadian machine tool distributors experienced a small decline in sales in the tail end of the third quarter, CMTDA president Marc Hasrouny told members attending the association’s 80th annual general meeting in Milton.
“Though the industry is still busy there has been some wait and see attitude of late and a lot of hesitation,” Hasrouny told the well-attended meeting. “Manufacturers remain uneasy to invest in new capital equipment especially when the cost of borrowing money is the highest it has been since 2008. Pair that with a lower Canadian dollar, higher material costs, higher machine costs, higher payroll, higher utilities, higher everything, it’s not unexpected that we have begun to see things slow.”
Hasrouny, who is the general manager of Megatel, cautioned not to read doom and gloom into his comments. He pointed out that the federal government’s latest economic forecast, although it slashed the 2023 real GDP forecast to 0.7%, stated the economy would avoid a major recession while announcing $11.3 billion in new spending this fiscal year and next. He added that industry experts expect that by Q3 and Q4 of next year we should see a slight increase in manufacturing and a true bounce back by 2024 with prices starting to correct themselves and interest rates going down.
“In the coming years, our government is investing heavily in the launch of new green technologies such as EV battery plants and new electric vehicle platforms. This puts Canada and the manufacturing industry in a strong position,” Hasrouny said.
He also pointed to improvements to some areas of the supply chain, most notably container prices which have come down to almost pre-Covid times. Port congestion, however, is still a major problem causing frustrating delays and additional fees, Hasrouny said.
“Thankfully, industry experts believe that we should start to see congestion ease as we head into 2023,” Hasrouny said.
There is one industry problem that Hasrouny didn’t see getting better: the shortage of skilled labour. Despite the push in automation, Hasrouny sees this issue continuing to be a major factor contributing to the slowdown of the industry. He cited the recent Canadian Manufacturers and Exporters (CME) annual labour survey which found that labour shortages in Canadian manufacturing have resulted in economic losses totalling nearly $13 billion this year. The survey also found that over the past year, 62% of Canadian manufacturers lost or turned down contracts and faced production delays due to a lack of workers and this resulted in $7.2 billion in lost sales and penalties for late shipments. At the same time, 43% of companies have postponed or cancelled capital projects because of labour shortages, corresponding to $5.4 billion of lost investment.
“These numbers are substantial, which is why I echo the CME’s sentiment that the government should be doing more,” Hasrouny said. “Whether it is providing some support for grass roots programs in Canada or welcoming more foreign workers through a faster, more streamlined application process, this is something our government needs to address.”
Hasrouny closed his remarks by asserting he is confident Canadian manufacturing will rise up to these challenges and continue to innovate the industry.