Is manufacturing making a comeback?

From a recent TJ column:

According to Statistics Canada, manufacturing sales in New Brunswick were up 7.7 per cent to $1.9 billion in October, the highest level on record. Compared to September, sales rose in 16 of 21 industries.

Compared to October of last year, the province’s manufacturing sales are up nearly 16 per cent – a faster growth rate than all other provinces.

As I have mentioned before in this column, in order to develop a fair assessment of the performance of New Brunswick’s manufacturing sector, we need to remove the output from the Irving Refinery.  That one facility accounts for more manufacturing sales than all other sectors combined.  In other words, a large increase in output from the oil refinery could be masking serious declines in other manufacturing sectors.

Unfortunately, Statistics Canada does not publish monthly data on petroleum products manufacturing in order to protect the confidentiality of the firms (or the firm) in the sector. 

However, Statistics Canada does publish detailed statistics on international exports on a monthly basis and since exports make up as much as 70 per cent of the value of all manufactured goods, it is a good proxy for current trends in manufacturing output from the province.

An analysis of recent international exports suggests that the oil refinery was the major driver of increased manufacturing sales from October 2013 to October 2014. The value of international exports from the petroleum products sector was up by $311 million or 55 per cent in October compared to last year.

The good news is that sales in other key manufacturing sectors are also up year-over-year.  Food and beverage manufacturing exports rose by 17 per cent.  Wood product manufacturing exports are up 26 per cent and potash exports are also up significantly year-over-year.

Will we see continued growth in the province’s manufacturing sector and will that growth translate into new, good paying jobs that we so desperately need?

There are a number of trends across North America that bode well for the manufacturing sector.

The rise of 3D printing is driving a revolution not only in product design and prototyping but also in the manufacture of cost competitive and highly customizable goods.   This will allow smaller manufacturers in Canada to compete with their larger rivals overseas.

Some manufacturing is coming back from China to North America in response to increasing costs and other factors.  In fact, many of the largest Chinese owned manufacturing firms are setting up here to be closer to their end markets.

Driven by the shale gas revolution, the cost of energy for manufacturing is declining significantly particularly in United States jurisdictions that are awash in low cost natural gas. 

There are several things that can be done to foster growth in the manufacturing sector across New Brunswick.

First, the government can and should look to its natural resources sector to foster GDP and employment growth. 

The recent announcement meant to encourage more potash exploration and production is one example.  Setting a new long term timber objective should lead to more investment and jobs in the forest products sector.  From fish and timber to minerals and natural gas, natural resources could be key to manufacturing jobs in the coming years.

Second, we need our manufacturers to embrace these new technologies such as 3D printing.

Third, we need to find ways to encourage new entrepreneurs to step up.  Manufacturing has fell out of favour as software and technology companies are now all the rage.  If we want the sector to grow, we will need more manufacturing start-ups.

Finally, we should be thinking about how our natural gas sector could lead to lower cost energy for manufacturers across the province.   It is a bit premature but there are more ways to leverage that sector to greater economic benefits than just providing a royalty stream to government.

By embracing new trends, fostering the value proposition for investment and encouraging new entrepreneurship, manufacturing could be a growth sector for the province in the coming decades.

This entry was posted in Uncategorized. Bookmark the permalink.