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UPDATE 2-Canada's Sept factory shipments surge a "good omen"

(Adds reaction, details)

By Gilbert Le Gras

OTTAWA, Nov 14 (Reuters) - Shipments from Canada's factories surged 5.2 percent in September on the highest rise in orders in the past year, marking a recovery from the August power blackout and auguring well for future growth, Statistics Canada said on Friday.

"This marked the third increase in the last four months for new orders, a possible good omen for future prospects. Widespread increases were reported, including motor vehicles, computers and aerospace manufacturing," Statscan said, noting that new orders rose 8.0 percent.

The rise in shipments was at the top end of expectations for, on average, a rise of 3.0 percent. Statscan said C$43.01 billion-worth ($33.12 billion) of goods were shipped in September, the highest level since March.

But shipments from July to September were down 0.4 percent following a second quarter drop of 3.9 percent as SARS, one case of mad cow disease and August's blackout hit what had been the most robust economy in the Group of Seven rich nations earlier in 2003.

"Today's manufacturing report should add even more fuel to the already blazing Canadian dollar because it suggests that growth prospects in Canada have improved markedly," said Carl Gomez, economist at RBC Financial Group.

Gomez said the figures showed shipments went beyond a rebound in Ontario to make up for lost business from August's power blackout with a 1.8 percent rise elsewhere in Canada.

Inventories, the factory stockpiles that Bank of Canada executives have singled out in speeches in the past month, fell 0.7 percent and to their lowest level since April 2000, to a value of C$60.9 billion, Statscan said.

Stocks of goods in factory warehouses were down 4.7 percent from April's recent high of C$63.89 billion, it added.

But the Canadian dollar's 18 percent rise against the U.S. dollar so far this year may be a "key obstacle to advances in demand from the United States" and could hinder reductions in inventories.

Unfilled orders rose 1.1 percent in September, the first rise since August 2002. Notably, aerospace manufacturers eked out their first increase, albeit 0.4 percent, in unfilled orders since August 2001, Statscan said.

The bellwether inventory-to-shipment ratio narrowed to 1.42 from 1.50 -- its lowest level since October 2002. A lower ratio means manufacturers are clearing inventories of finished products faster than before due to higher demand.

($1=$1.30 Canadian)