PMI Index Steel Industry Metal Processing Centers Commodity Prices Oil Rigs Automotive Auto Parts Class 8 Truck Sales AG Equipment Power Generation Aerospace Infrastructure Manufacturing Government Policies

1. Manufacturing - Analysis -
Canada and United States - June
23, 2016
By: Paul Young, CPA, CGA

2. • This presentation is one perspective when it comes to manufacturing

3. Paul Young - Presenter
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
• Youtube Channel -
https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

4. Agenda
• PMI Index
• Steel Industry
• Metal Processing Centers
• Commodity Prices
• Oil Rigs
• Automotive
• Auto Parts
• Class 8 Truck Sales
• AG Equipment
• Power Generation
• Aerospace
• Infrastructure
• Manufacturing
• Government Policies

5. PMI – Index – Canada
• May data from the RBC PMI
highlighted that Canadian
manufacturers experienced
another modest upturn in overall
business conditions in May, which
marked three months of sustained
improvement.
• Output growth expanded at its
fastest pace for almost one year,
but the latest survey pointed to
slightly weaker rates of new
business and employment growth.
There were also signs of pressure
on operating margins as input cost
inflation accelerated in May, while
output charges were broadly
unchanged.
Source: RBC

6. Steel Industry

7. Metal Processing Centers

8. Commodity Prices

9. Key Sector – Oil Rigs
• Baker Hughes Incorporated (NYSE:BHI)
announced today that the international
rig count for May 2016 was 955 up 9
from the 946 counted in April 2016,
and down 203 from the 1,158 counted
in May 2015. The international offshore
rig count for May 2016 was 229, up 9
from the 220 counted in April 2016,
and down 55 from the 284 counted in
May 2015.
• The average U.S. rig count for May
2016 was 408, down 29 from the 437
counted in April 2016, and down 481
from the 889 counted in May 2015. The
average Canadian rig count for May
2016 was 42, up 1 from the 41 counted
in April 2016, and down 38 from the 80
counted in May 2015.
• The worldwide rig count for May 2016
was 1,405, down 19 from the 1,424
counted in April 2016, and down 722
from the 2,127 counted in May 2015.
Source: Business Wiire

10. Automotive Production
• May U.S. auto industry sales
weakened year over year,
with General Motors, Ford
Motor and other manufacturers
reporting lower U.S. vehicle sales
for the month due to sluggish
demand for sedans and fewer
selling days.
• The auto selling rate for the month
came in at 17.45 million. Forty
economists polled by Thomson
Reuters expect on average a
seasonally adjusted selling rate of
17.3 million vehicles for May, not
greatly changed from April but
down from 17.8 million a year
earlier.
• In 2015, vehicle sales were a record
17.47 million vehicles, according to
Autodata Corp.
Source: CNBC

11. Auto Part – Canada
• Canadian car manufacturers are struggling to attract investment in new plant facilities, which will make it difficult
to maintain current production levels beyond 2017, according to The Conference Board of Canada’s latest
Canadian Industrial Outlook: Canada’s Motor Vehicle Manufacturing Industry. “The phasing out of several models
at GM’s Oshawa Flex and Consolidated plants by the end of 2016 could spell bad news for Canadian motor vehicle
production,” said Sabrina Bond, Economist, Custom Economic Services, The Conference Board of Canada.
“Securing replacement products will be critical to avoiding a steep decline for the industry starting in 2017.”
• Highlights of the report include:
• The Canadian auto sector is struggling to attract investment in new plant facilities and retain current production levels. In the first
four months of 2016, trucks accounted for 65 per cent of new vehicles purchases in Canada.
• Industry revenues are expected to drop sharply in 2017 as model shutdowns at GM’s Oshawa
• Consolidated and Flex plants should contribute to a production loss of 167,000 vehicles.
• Industry production should see an uptick this year, thanks to strong vehicles sales in Canada and the U.S. New vehicle sales in the
U.S. are projected to reach 17.7 million units this year, while Canadian sales are on track to reach 1.8 million units. From 2017
onward, however, production is expected to drop as model shutdowns at GM’s Oshawa Consolidated and Flex plants contribute
to a loss of 167,000 vehicles. This is in addition to the annual production loss of 72,000 fifth-generation Chevrolet Camaros to
Michigan at the end of 2015. In all, Canadian motor vehicle production is forecast to decline by 10 per cent in 2017 with average
growth of less than 1 per cent through 2020.
• Source – Conference Board of Canada

12. Class 8 Truck Sales
• April heavy truck sales dropped 18.9 percent from the same month last year and 17 percent from the
previous month, WardsAuto reported today. Year-to-date, sales through April fell 10.3 percent from the
first four months of 2015.

13. Agriculture Equipment
• It was more of the same in May for U.S.
retail sales of ag tractors and combines,
with under 40HP tractors leading the
way and sales of larger tractors and
combines continuing to lag, according
to data from the Association of
Equipment Manufacturers (AEM), the
leading trade organization for off-road
equipment manufacturers and
suppliers.
• U.S retail sales of farm tractors under
40HP were up 9.4 percent in May 2016
compared to the same time period last
year, and up 15.5 percent January
through May. For 2WD tractors 40-
100HP, sales were up slightly for May
compared to last year – plus 1.4
percent, and year-to-date are tracking
at minus 2.1 percent.
• May sales of 2WD 100+HP tractors in
the U.S. declined 3.5 percent, with
year-to-date sales down 24.3 percent,
while 4WD tractors dropped 26.1
percent year-over-year and dipped 30.6
percent year-to-date.
• Combine sales declined 40.2 percent
year-over-year for May but for January
through May dropped 28.8 percent
compared to 2015 year-to-date sales.
Source: www.aem.org

14. Power Generation

15. Aerospace
• Canada's aerospace manufacturers had their highest pre-tax profits since 2001 last year as the lower Canadian dollar helped the export-oriented sector
overcome a "disappointing global economy," according to the Conference Board of Canada.
• The Ottawa-based economic think tank said in a report released Tuesday that Canada's aerospace industry earned $1.56 billion in pre-tax profits in
2015 on $21.8 billion of revenues -- up from $952 million on revenue of $19.9 billion in 2014.
• Meanwhile, the Conference Board forecasts sector profits will surpass $2.13 billion in 2020 as the weak business jet market improves and Bombardier
Aerospace delivers CSeries aircraft and its new Global business jets, currently under development.
• "There's a bit of a ramp-up in production that we see going forward just based on some orders from some of the major players in the industry," study
author Carlos Murillo said in an interview.
• The aerospace division of the Montreal-based plane and train maker (BBDb.TO) had a net loss of US$5.1 billion last year. But the company, which
reports in U.S. dollars, said the division earned US$242 million in pre-tax operating income, excluding hefty special charges.
• Besides Bombardier, Canada's top aerospace companies include Boeing Canada, CAE, Magellan Aerospace, Thales Canada, Heroux-Devtek and Avcorp
Industries.
• The Conference Board says industry profitability last year was bolstered by increased prices and a reduction in labour costs following a 20 per cent
reduction in the number of employees.
• It expects the industry's workforce will grow about four per cent a year to keep up with rising production.
• Going forward, aircraft deliveries are expected to be the main driver of revenue growth.
• The Conference Board said improving global economic conditions and another year of record airline profits, in part due to low fuel costs, will propel
new aircraft orders and support the industry's financial situation.
• "Over the medium term, improving financial conditions for the global airline industry and better macroeconomic conditions will support
manufacturers of commercial and business aircraft," the report said.

16. Infrastructure Spending Canada
- Build Canada Fund
- Gas Tax Fund
- New Commitments from Federal
Government
- Provinces spending on Transit
- Municipalities spending on bridges/Roads
United States
- The USA in particular is seeing a great deal of
interest, moving it up the index from 11th in
2012 to 8th in 2016. This rise is driven by its
recently revived solid economic position, low risk
environment and strong financial sector. Given
the massive opportunities in the country, there is
a lot for investors to get excited about. In the
transport sector alone the investment gap is
estimated at around $86.5bn per annum.

17. Manufacturing Issues
• The research comes at a time of increasing anti-China rhetoric in US politics, and
ahead of three politically sensitive anti-dumping cases this summer against
Chinese steel imports that could result in the US imposing punitive duties of as
much as 500 per cent. GDP Growth forecasted 3.1%. Countries like China, Brazil
and others are struggling with growth
• Retail sales growth 1.5 % to 2.3% range
• Government strapped for cash (infrastructure)
• Defense spending curtail (Canada and USA)
• CPP (Payroll Tax Hikes)
• Carbon Tax/Pricing
• Skills Trades Gaps (Laser Welding, Robotics, Welders, Engineers, Advance
Material, 3-D Printing, etc)

18. Government Policies – Metal Fabrication
• Canada
• Automotive
• Aerospace
• Food
• Mining
• Forestry
• United States
• Innovation Funds for various manufacturing

19. Sources
• Contact: paul_young_cga@Hotmail.com
• Other links
• Canadian Manufacturing – https://www.youtube.com/watch?v=Ea-kch0s94E
• Retail Sales - https://www.youtube.com/watch?v=BzBFIxFy5Fo
• Profitability - https://www.youtube.com/watch?v=lL0k153FQlI
• Cultivating Innovation - https://www.youtube.com/watch?v=BEIP8kV5IWg
• How to grow an economy - https://www.youtube.com/watch?v=lzV8L1tU6k0
• Government Policy - https://www.youtube.com/watch?v=9mDGerSGIg0
• Infrastructure - https://www.youtube.com/watch?v=RDI5oMt1SIM