Canadian Manufacturing Sector Facing Possible Recession

Canadian manufacturers are facing tough times due to the high dollar, record-high energy prices, materials costs and a squeamish U.S. consumer.

Canada is hovering on the brink of a manufacturing recession, according to a report from The Globe And Mall. Commonly, two successive quarters of contraction are considered to be a recession.

Manufacturing shipments were reduced in the first quarter of 2006, numbers assembled by Statistics Canada show, and were almost certainly in negative territory for the second quarter too. Factory production dropped 0.3% in April alone, curtailing the country's economic growth for the month to just 0.1%, figures released Thursday show.

The high dollar is catching up with manufacturers, especially in Central Canada, but they're also dealing with record-high energy prices and materials costs, and increasingly, a reluctant U.S. consumer.

Jobs in the sector have been disappearing rapidly. Approximately 85,000 positions were lost in 2005, or 3.7%, a drop not seen since the recession of 1992. Manufacturing makes up about 17% of the Canadian economy.

Manufacturing of products made from petroleum, coal, chemical products and primary metals has remained positive.

Shipments in the auto industry fell 3.5% in 2005, after a 4.5% increase in 2004. Car parts production dropped 1.8% last year.

While Toyota, GM, Ford and Honda have all said they plan to increase their investment in Canada, over all, the auto and parts manufacturing industries are cutting back.

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