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Thursday, March 16, 2006

Canada's manufacturing sector got off to a weak start this year, as January's shipments were dragged down by Ontario's ailing auto industry.

Yesterday, Statistics Canada reported that manufacturing shipments unexpectedly slipped 0.7 per cent to $51.8-billion in January following a 1.8-per-cent rise in December.

Economists had been expecting a 0.4-per-cent increase in shipments.

In Ontario, shipments dropped by a large 2.1 per cent compared with a month earlier, Statscan said. And for the first time since the recession of the early 1980s, Ontario's shipments made up only half of the national total, noted Bank of Nova Scotia economist Mary Webb.

Removing motor vehicles and parts from the mix in January, shipments actually edged up by 0.3 per cent.

That underlying strength has economists speculating that the Bank of Canada will again raise interest rates on April 25.

Canada's manufacturing sector lost 41,600 jobs in January, and more than 100,000 in the past year.

Auto makers have been pushed to make restructuring announcements because of soaring gas prices and fickle consumers, Statscan said.

Auto shipments tumbled by 5.4 per cent in January, to $5.4-billion, as temporary plant closings and production slowdowns were announced.

It was the third monthly decrease in a row.

The troubles flowed through to the makers of car parts, who saw shipments fall 7.6 per cent to $2.6-billion.

Statscan added that the soaring Canadian dollar, which recently closed at a 14-year high, has challenged manufacturers. The majority of their goods are sold abroad and a high loonie makes them more expensive for buyers.

Paper makers also suffered in January, with a 4.2-per-cent decline in shipments.

But while some key industries are hurting, January's declines were not widespread, with only seven of the 21 industries cited reporting lower shipments.

The bulk of the decrease came from Ontario, where shipments fell by 2.1 per cent or $554-million.

A 3-per-cent surge in primary metal prices helped boost demand for aluminum, nickel and zinc products -- offsetting some of the auto declines.

And high temperatures led to a construction surge that increased the price of lumber products by 1.6 per cent and propelled Canadian shipments of wood products to $3-billion in January. CP, Staff

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