Why Canada’s manufacturing sector is stronger than you think - Macleans.ca

Why Canada’s manufacturing sector is stronger than you think

The numbers say it all


Last week, BMO research cited continued increase in Canada’s net trade balance in energy, and increases in our net trade deficit in manufactured goods. This brought about some hand-wringing from Daniel Tencer at the Huffington Post, who wrote that, “Canada no longer knows how to sell anything to the world except oil and gas.”  Others in this space have written a great deal about why trade deficits aren’t, on their face, good or bad, so I’ll leave that for now and move on to other things.

Tencer’s piece was entitled Canada’s Great Economic Divide, In One Chart, and the chart is shown below. It shows net exports of energy and non-energy goods from Canada since 1988. The story seems clear, but all is not always as it appears.

Value of Canadian net exports (Customs basis) in millions of dollars (monthly) for energy and non-energy trade. Source: Statistics Canada.

Here’s the thing about trade balances: they don’t really tell you what we sell to the world. They tell you what we sell to the world, net of what we buy from the world.  If you want to know what we sell to and buy from the rest of the world, you have to look at exports and imports separately, and the story is very different.

Value of Canadian exports (Customs basis) in millions of dollars (monthly). Source: Statistics Canada.

As you can see from the graph above, manufactured goods including cars and car parts, aerospace, machinery and equipment, and electronics still represent more of what we sell to the rest of the world than anything else. If you included in the manufactured goods the so-called valued-added energy, forest, and mineral products, that share would get even larger.

Even more surprisingly, although we hear a lot about how manufacturing exports have declined (some people even blame the Dutch for that), they have grown significantly since the depths of the Great Recession. While energy exports have grown rapidly (12% per year on average) since June, 2009, exports of manufactured products have increased at a rate of 7% per year over the same time period.

The story, if there is one, is not so much what we don’t sell to others but what we don’t buy from ourselves. If you look at the same data on imports, you’ll see what’s driving the story in the BMO research.

Value of Canadian imports (Customs basis) in millions of dollars (monthly). Source: Statistics Canada.

As the graph above shows, imports of manufactured goods swamp all other imports. While we’re selling more manufactured goods to the rest of the world than we did in 2009 (though still less than we did at the turn of the century) we’re buying a lot more from the rest of the world than we ever have.

I guess, at least for the time being, Canadians’ worlds haven’t gotten that much smaller.  And rest assured, we still know how to sell about $18 billion per month of things to the world which are not oil and gas.


Why Canada’s manufacturing sector is stronger than you think

  1. AL, an outstanding issue from an earlier post a couple of weeks ago.

    In discussing supply chains for the booming O&G sector, I suggested offshoring of manufacturing can be accelerated due to economies of scale (critical mass), exchange rates, labour costs etc. – highlighting the now non existent Dofasco, Stelco etc.

    You indicated you would look closer into this.

    I presume you now have assembled the data to do this. This may, in part, explain a portion of the declining manufactured exports, increased manufactured imports. Can you now pull the data/graph together, and perhaps amend this post?

    • Your presumptions are, as always, interesting.

      • Not familiar with StatsCan data. Doesn’t one of C17, C18,C19, C21, C22 cover this? Not a big fan of lumping together.

        • I disaggregated relative to the post to which I am responding. Your objections are duly noted.

          • Ahhh…the Fog of War. Choose the arsenal carefully, on both sides.

  2. Share of welding and painting done by machines to build a typical car…..95%

    Number of robots for every 10,000 humans employed in the US automotive industry…1,091

  3. You have previously suggested Canada’s O&G industry is losing in the neighbourhood of $36 – $56 million/day ($1100 – $1700 million/month) due to suppressed prices for oilsands output. That’s getting close to a full gradation on your first two graphs.


    Wouldn’t it make sense to show that as a dotted green line to better highlight the increasing energy trends, on a go forward basis?

    • No. The data show actual exports, not hypothetical exports.

      • But, it shows trends. Isn’t that the point? Going forward.

        And encapsulates some rather irregular activities – worldwide recession, and severe (temporary, one presumes) oil discount. Neither should go unnoted in this analysis.

        • When you publish your analysis, you should feel free to include whatever you choose.

          • I’m not an economist, but it’s hard to look at last 4 yrs of that 2nd last graph, and not recognize that this is during the recovery period after a significant worldwide recession, and that if you were to extrapolate the period from Sept ’00 to Sept ’08, where we are in May ’13 is pretty close.


          • And encapsulates some rather irregular activities – worldwide recession, and severe (temporary, one presumes) oil discount. Neither should go unnoted in this analysis.

  4. So, UNADJUSTED for inflation (22% since 2000), Canadian manufacturing exports are down 23% from where they were in 2000. Somehow, I don’t think the manufacturing sector is jumping for joy.

    • If you take into account cuts in corporate taxes it is even worse for manufacturing since 2003 currency appreciation and since 2007 recession down outh. Fukkers.

  5. Made in China~

  6. I would prefer to see data adjusted for inflation and per capita. Without that, it’s difficult to do a fair analysis.

    That being said, you have a good point, that Daniel Tencer’s analysis is complete garbage inside and out.

  7. This article is ridiculous. Canadian manufacturing has been destroyed via 3 factors. Regulations, debt, and taxes. If Canadian manufacturing was so strong, why is barely anything made here? Canadians have high debt levels because they need to charge their imports from overseas since they don’t export anything to pay for them. Look at trade deficits with countries like Germany. Canada sends ash and lumber and receives luxury goods. This country is heading into 2nd world status. Entire east coast and now communities in Ontario are pretty much surviving off of working in oil rich Alberta. Factories are closing left right and center everywhere else.