Manufacturing sales
Latest: +2.0% (Actual) +0.4% (Expected)
Previous: -1.1% (downwardly revised from -1.0%)
FACTS: Factory sales rebounded 2.0% in August after having fell 1.0% in July (top chart). In August, sales were up in 15 of 21 industries, representing 82% of total sales. However, more than half of the increase came from motor vehicles (+13.9%). Excluding motor vehicles, parts & accessories, factory sales were up 1.1%. New orders were up 5.3%, about two-thirds of the jump coming from transportation equipment (+23.9%), which roughly recovered July’s loss. Unfilled orders were up 1.5%, with almost half of the rise coming from aerospace products (+1.7%), which reversed July’s loss. Inventories increased 1.3% in August, the main contributors being aerospace products (+5.6%), primary metals (+2.5%), machinery (+2.3% and computer & electronic products (+4.7%). The inventory-to-sales ratio dropped 0.01 to 1.33. In constant dollars, manufacturing sales were up 2.1% in August.
OPINION: This morning’s report has been partly influenced by a rebound in manufacturing sales of motor vehicles, after having registered larger-than-usual production declines in the previous month. August’s rebound in manufacturing sales does not change the fact that the gain in volume sales since last March is minimal, and that the manufacturing sector, unlike the Canadian economy as a whole, is still far from its pre-recession peak (middle chart). Looking ahead, further progress will remain slow, as the U.S. is currently stuck in a slowgrowth trap. Furthermore, the competitiveness of Canadian manufacturers, who export about half of their production, is hampered by the appreciation of the loonie against the greenback. Several exporting industries, which already operate with thin profit margins, will face a challenging environment if the appreciation trend persists. Due to the recent slow pace of improvement in volume sales, factory sales so far make a minimal contribution to economic growth in Q3 (bottom chart).
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