Besides being a resource-based economy, Canada has also traditionally been powered by the ups and downs in the manufacturing sector.
Over much of our economic history, real output growth from manufacturing broadly kept pace with output growth from the business sector overall, as declines in some manufacturing industries were more than offset by growth in others.
A new study released Tuesday by Statistics Canada shows that this changed markedly after 2000, as the Canadian manufacturing sector adjusted to significant changes in the global economic environment, including: the bursting of the tech bubble in 2001; the global commodity price cycle; the appreciation of the Canadian dollar vis-à-vis the U.S. dollar; and stronger competition from abroad.
So, after 2000, manufacturing output growth leveled off and then declined sharply.
The agency goes on to say much of this change was pointed up by the recession in 2008-09. Real output in manufacturing declined at an annual average rate of about 9% during the recession, compared with a less than 2% average annual contraction in the business sector overall.
Following the end of the recession, the recovery in manufacturing was the slowest since the Second World War, as the sector did not return to pre-recession levels for nearly six years. Real output in this sector remains significantly lower than peak levels observed in 2006
Weakness in our durable goods industries has heavily influenced the manufacturing sector since 2000. This weakness was felt especially hard in the transportation equipment industry, and largely due to declines in motor vehicles and parts production. However, compared to the United States, the Canadian transportation equipment industry had a similar impact on growth in the manufacturing sector; therefore, this sector does not explain the relative differences in manufacturing output between the two countries.
