Canada's manufacturers feeling left on their own

Canadian manufacturers appear to be increasingly alone in their alarm over the damaging effects of the soaring currency and the faltering U.S. economy, as policy makers look to the wider picture and see cause for optimism.

The anxiety level rose a few notches last month after the Canadian dollar pushed beyond parity with the U.S. dollar, exacerbating worries about the U.S. housing slowdown. The currency has since continued its meteoric rise and on Monday hit a 47-year high of over US$1.04.

A fourth-quarter survey of manufacturers showed just how glum the sector was becoming. The number of firms reporting impediments to production jumped to 36 percent from 28 percent in the third quarter. Those expecting a drop in production grew to 23 percent from 15 percent and those seeing a fall in new orders rose to 22 percent from 19 percent.

The sector has shed 71,000 jobs in the past year. And by most accounts, things are only going to get worse.

"I think the real impact is going to be seen over the next six months," said Jayson Myers, president of the Canadian Manufacturers and Exporters association.

"Maybe the dollar is just the symptom here of the weakness of the U.S. dollar and the weakness of the U.S. economy. That is going to have a far more negative impact on expectations than perhaps even the dollar itself," he said.

Canadian manufacturers are the canary in the coal mine, getting the first whiff of any bad news from the U.S. economy because that is the main market for their goods. The sector accounts for roughly 70 percent of total exports.

"It's going to be much more difficult to adjust to a high dollar if your customers are not buying as much of your product," said Myers.