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Slower start to 2015 requires context for Saskatchewan's manufacturing sector

Published by CME Staff on July 02, 2015

By Derek Lothian

(Please note that all data used below is not seasonally adjusted, unless otherwise denoted.) 

Only a few short months ago, Saskatchewan was celebrating its third consecutive record year for manufacturing sales in the province — more than $16.4 billion through 2014, seasonally adjusted. The party, however, was short-lived. 

Before the calendar even flipped over, manufacturers found themselves knee-deep in an increasingly uncertain economic climate, hampered by low commodity prices here at home and shaken stability in key export markets around the world.

The headlines followed shortly thereafter: Layoffs, plant closures, cancelled or differed investment — the news, very quickly, carried a much different tone. Looking only at the short-term numbers, it wasn't difficult to see why, either.

In the final quarter of 2014, manufacturing sales had dropped to their lowest point since Q4 of 2012. Employment took a dive as well — 5,300 jobs off the 15-year high set in the fall of 2007.

And while the first quarter of 2015 provided some relief — up more than 10.2 per cent from the previous quarter — sales remained down 5.9 per cent year-over-year. To throw even more cold water on any lingering optimism, manufacturing employment in the province dipped yet again, this time to its lowest level since 1995.

Doom and gloom, right?

Well, not so fast. Yes, it is important to acknowledge that these are trying times for many Saskatchewan companies, and there is plenty of risk still abound. But it is also important to widen the lens and consider a more historical context.

Since the turn of the new millennium, Saskatchewan manufacturing sales have increased 131 per cent on an annual basis, compared to only 10.6 per cent nationally. That is an astonishing pace of growth. Sales per employee, meanwhile — a key measure of productivity performance — have increased nearly 160 per cent.

Compounding those numbers is the fact that this growth has been diverse growth, in terms of both non-durable goods (which make up roughly two-thirds of Saskatchewan's manufacturing output) and durable goods. 

Take agricultural implement manufacturing, for example — a sector that has struggled incrementally since the beginning of last year. Even though sales in the industry plummeted 26.8 per cent in the second half of 2014, they kicked off 2015 still roughly 63 per cent higher than only one decade ago. 

Food manufacturing, fabricated metal, machinery and equipment, chemicals, wood products — all repeat similar storylines.

The reality is that, despite significant movement towards diversification, Saskatchewan's manufacturing base remains heavily tied to three external factors: The price of oil, the price of potash, and the strength of agricultural markets. All three are currently facing challenge. By default, so, too, will Saskatchewan manufacturers.

But a broadened perspective tells us that we can and will weather the storm. All the ingredients are there. This is, instead, a unique opportunity to retool, further diversify and streamline operations for the turnaround that's sure to come. Our long-term competitiveness depends on it. 

Derek Lothian current serves as Vice President of Canadian Manufacturers & Exporters, as well as Executive Director of the Saskatchewan Manufacturing Council. He may be reached at derek.lothian@cme-mec.ca.


 

 

 

 

 

 

 

 

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