Canadian manufacturers are boosting efforts to sell their products at home as the weak U.S. recovery and high loonie are making it hard to recover sales lost during the recession.
Demand for manufactured products from Canada’s largest trading partner has declined as U.S. economic growth slowed to 1.5 per cent in the second quarter. Consumer spending has been depressed since 2008, forcing manufacturers to look to other markets for growth. Increasingly they are picking up sales at home.
Canadian factory sales were 4-per-cent below their pre-recession peak on an annual basis by the end of last year. But while manufacturing exports fell 12.4 per cent between 2007 and 2011, domestic sales of the same products rose 3.4 per cent, said Jacques Marcil, a senior economist at Toronto-Dominion Bank.
“[Proportionally], more of the sales are going in to the Canadian [market] than they used to,” Mr. Marcil said.
Canadian sales hit a record last month at ABS Friction, a brake pad manufacturer in Guelph, Ont.
Thanks to a campaign chief executive Rick Jamieson has dubbed “Brake Pads Really Made in Canada,” ABS Friction’s Canadian sales have increased from zero to 5 per cent of total revenue over the past three years.
Mr. Jamieson is working toward his goal to boost that to 10 per cent over the next year through a brand he has specifically developed for the Canadian market.
Targeting Canadian customers is important, he said, because he needs to diversify from his predominantly American customer base.
“Sales in the U.S. are down, there’s no question,” Mr. Jamieson said, citing the weak U.S. economy.
“There’s no reason to think you should spend a lot of extra time in the U.S.”
Most exporters in the manufacturing sector rely on the American market. Last year, 77 per cent of manufacturing exports still went to the United States, a slight shift from the 79 per cent recorded in 2007.
There used to be a 50-50 split between manufactured products sold domestically and those shipped to the U.S. and elsewhere, Mr. Marcil said.
Now, the split favours domestic sales, which made up 54 per cent of total sales in 2011, he said.
In some manufacturing sectors, the change has been much more drastic.
Domestic sales of computers and electronic products jumped 66 per cent between 2007 and 2011, while exports slumped 32.5 per cent, Mr. Marcil said.
Sales of machinery within Canada have also surged 40 per cent since before the recession, while exports in the sector declined.
Many of these domestic sales are probably fuelled by business in the oil sands, where investment in machinery and equipment, coupled with oil and gas exports, made up one-third of Canada’s economic growth during the 2010 and 2011 recovery period.
Growing domestic sales are also part of a strategy to cope with the rising loonie, which this week hit its highest level against the U.S. dollar since May.
“I don’t have to worry about the dollar when I’m selling the product ... in Canada,” Mr. Jamieson said.
But the growing proportion of Canadian-made products sold in Canada has not totally made up for what was lost during the recession.
The share of Canadian manufacturing exports sent to China is on the rise, Mr. Marcil said, which might help close the gap.
Manufacturing sales to China chalked up a 3.3-per-cent gain in the first half of 2012, compared with the same period last year.
Manufacturing sales fell 0.4 per cent in June, Statistics Canada said Thursday, though that was driven by a sharp drop in petroleum and coal products. Growth was 1.1 per cent excluding those categories.Report Typo/Error