Analysts: Canada’s manufacturing sales point to growth

Report offers 'another pleasant surprise from the Canadian economy'

May 16, 2018
The Canadian Press
The Canadian Press

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OTTAWA—Canadian manufacturing sales rose a better-than-expected 1.4 percent in March, as weakness in motor vehicle sales was more than offset by gains in the metals and aerospace industries, Statistics Canada reported May 16.

Economists had expected an increase of 1.2 percent, according to Thomson Reuters Eikon. Sales rose to $57.1 billion in March. Excluding motor vehicles, parts and accessories, Canadian manufacturing sales were $49.1 billion, up 1.8 percent from February.

The report was “another pleasant surprise from the Canadian economy,” said TD Bank senior economist Brian DePratto. He noted that much of the growth came from price appreciation, amid currency moves, but there was also a solid climb in volume terms. Overall Canadian manufacturing sales in volume terms were up 0.6 percent.

“Outside of the resale housing market, and beneath some idiosyncratic shocks early in the year, the Canadian economy continues to perform well,” he wrote.

“There are obviously some countervailing forces at play, but with solid U.S. demand in the cards, the outlook for Canadian manufacturers remains healthy. What’s more, with factories running near full-tilt despite solid investment through 2017, there is a clear incentive for firms to continue building out their capacity to meet demand.”

The March manufacturing statistics signal that the March GDP report will be decent and show the sector had momentum going into the second quarter, Nathan Janzen, senior economist at RBC Economics wrote in a note.

“Although key reports on the retail and wholesale trade sectors are still to come, with data in hand we are tracking a 0.2 per cent increase in monthly GDP in March. That would build on the 0.4 per cent February gain that more than retraced a 0.1 per cent dip in January,” Janzen said.

The value of motor vehicle sales fell two per ent to $5.2 billion and motor vehicle parts crept up 0.4 percent to $2.8 billion, Statistics Canada reported.

Manufacturing sales in Ontario, which is home to Canada’s auto assembly plants and the country’s largest manufacturing sector, showed a third consecutive monthly increase, rising a modest 0.1 percent to $26.4 billion.

Aerospace products and parts were up 10.6 percent to $1.9 billion, primary metal sales rose 4.2 percent to $4.4 billion, and fabricated metal products rose 4.6 percent to $3.3 billion.

Quebec, which is home to Canada’s second-largest provincial manufacturing industry after Ontario, booked a 2.9 percent gain to $13.8 billion on a seasonally adjusted basis.

British Columbia manufacturing sales increased four percent to $4.6 billion in March, following four consecutive monthly declines, largely due to higher sales in the wood product industry.

In total, seven provinces showed gains while sales were down in Manitoba, Nova Scotia and Prince Edward Island due to lower sales of durable goods.

On an industry basis, gains were recorded in food manufacturing (up 0.9 percent to $8.6 billion) and wood products (up 3.7 percent to nearly $3 billion).

Other declines were in petroleum and coal products (down 0.3 percent to just under $6 billion) and chemicals (down 0.9 percent to $4.3 billion)