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Factory shipments show signs of life in March

Chrysler employees assemble cars at the assembly plant in Brampton, Ont., in this photo from 2011.

Kevin Van Paassen/The Globe and Mail

Canadian factories are powering up, gaining from the slow but steady pickup in the United States and changing their ways to take advantage of the resource boom.

Despite fresh jitters over Europe, many companies are more optimistic than they were a year ago, when escalating troubles forced them to scrap their investment and hiring plans.

Shipments from Canadian factories surged 1.9 per cent in March, both in value and volume terms, according to Statistics Canada, for the fastest gain in six months. Unfilled orders climbed to a three-year high, while new orders also rose, indicating momentum going forward.

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Sales among manufacturers will probably be volatile as long as the global recovery remains spotty. Still, the recent rebound suggests that the healthier U.S. economy, led by an impressive comeback in manufacturing, is benefiting Canadian producers of everything from cars to aerospace products.

Teledyne Dalsa Inc., an electronics manufacturer in Waterloo, Ont., is one of those companies, posting improved bookings throughout the first quarter.

It sells components to other manufacturers, so the increase in orders suggests "money is available and production is in an expansionary mode," said chief executive officer Brian Doody.

"Our production facilities here in Ontario and Quebec are busier now than they were two or three months ago," Mr. Doody said.

Even as sales of energy products in March soared to their highest level since the summer of 2008, the bulk of manufacturing industries gained, too. Ontario and Quebec, the provinces most affected by the clobbering of the sector in the recession, both saw increases.

This illustrates how some central Canadian manufacturers are adapting to the new environment.

In the town of Thorold, Ont., near Niagara Falls, Iafrate Machine Works Ltd., which primarily served the auto industry, was gutted along with its customers in the downturn.

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Its work force shrank to 30 from about 120, with most of those left sharing shifts and working no more than 24 hours a week. But today, the company is back to about 85 full-time employees, and a radically different operation geared toward the oil-and-gas and alternative energy sectors, with a more highly skilled work force.

"We transitioned, we had no choice," Bruno Iafrate, who now runs the business that has been in his family since the 1970s, said in an interview. "We were trying to keep our plant operational, so we went out searching for new avenues, especially out West."

Still, the March increase in shipments followed two consecutive monthly declines, underscoring that the climate is still volatile. And inventories fell by the most since September, 2009, indicating that few businesses are confident enough in demand to build big stockpiles.

Harry Hall, CEO of Aberfoyle Metal Treaters, said in an interview that he has seen a pickup in the past four or five months for his own business, and that the metal treating sector worldwide is doing about 17 per cent better than a year ago.

The industry does work for resource projects as well as automotive and aerospace companies, so this is a tentative sign of a broad pickup in production across sectors, he said.

"All indications are that things are picking up across the board, so I wouldn't say we're off and running, but we're certainly more optimistic than we were this time last year," he said.

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Even so, Mr. Hall illustrated his "cautious optimism" by saying that if demand holds up over the next three to six months, Aberfoyle might add one or two employees to its current roster of 28. Plus, over the next couple of months, it may spend about $200,000 on capital equipment.

Linamar Corp. has expanded from its auto parts base into construction equipment and components for the energy industry, including wind turbines. More than half of Linamar's 15,687 employees at the end of 2011 worked at the company's Canadian factories, most of which are sprinkled throughout the city of Guelph, which is also where it has kept its head office.

One thing that's helped drive manufacturing jobs higher is the strong rebound in North American vehicle production.

In the first four months of 2012, assembly plants in Canada, the United States and Mexico cranked out one million more vehicles than they did a year earlier, a 21-per-cent increase.

With reports from Greg Keenan and Richard Blackwell in Toronto.

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About the Author
Economics/business writer

Jeremy has covered Canadian and international economics at The Globe and Mail since late 2009. More

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