CA: Manufacturing Sales

Tue Mar 17 07:30:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -1.2% -1.7% 1.7% 1.6%
Year over Year 2.9% 5.2% 5.0%

December's (slightly smaller) revised rebound in manufacturing sales proved short-lived as January posted a steeper than expected monthly decline of 1.7 percent. What was the sharpest monthly drop since August 2014 reduced annual growth of shipments from 5.0 percent to 2.9 percent.

Headline sales were hit by weaker prices and volumes performed somewhat better in recording a 1.0 percent decrease from year-end.

Within the overall monthly nominal decrease sales fell in fourteen of the twenty-one reporting subsectors. The main area of weakness was petroleum and coal (minus 11.9 percent) but machinery (minus 8.9 percent) and chemicals (minus 4.5 percent) also struggled as did primary metals (minus 4.3 percent). On a brighter note, there was a surge in aerospace product and parts (21.7 percent), largely reflecting exchange rate volatility. Other transportation (30.1 percent) and computer and electronic products (5.3 percent) similarly enjoyed a good period.

Otherwise the survey made for mixed reading. On the positive side, new orders were up a more than healthy 12.1 percent versus December, again due to a bounce in the erratic aerospace products and parts category, and backlogs expanded 7.2 percent. However, inventories jumped 2.2 percent to lift the inventory/sales ratio by a sizeable 0.05 months to 1.39 months.

Having already seen January merchandise export volumes slump 2.8 percent on the month, the renewed softness of real manufacturing sales suggests that the economy got off to a sluggish start in 2015. The BoC would seem to be in wait-and-see mode at the moment but more of the same would quickly renew speculation that another cut in official interest is not far off.

Manufacturing sales are the Canadian dollar level of factory shipments for manufacturing durable and nondurable goods.

Manufacturer's shipments represent the monetary level of factory shipments for durable and nondurable goods and are a relevant indicator for an export-oriented economy. The data are used by analysts to evaluate the economic health of manufacturing industries. They are also used as inputs to GDP and needless to say, these data are used by the central bank in its decision-making process.

The monthly survey of manufacturing of which shipments is a part, provides a broad look at manufacturing activity levels. The level of activity in manufacturing can be affected by the level of interest rates which slows or stimulates the demand for goods and production. Shipments are an indication of how busy factories have been as manufacturers work to fill orders. The data not only provide insight to demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. Because a large proportion of shipments are headed south of the border to the U.S. and include a wide variety of durables, shipments are affected by U.S. economic activity as well as the exchange rate. Although the focus in this report is on shipments, it also contains information on inventories and new and unfilled orders.

Results from this survey are used by both the private and public sectors including finance departments of the federal and provincial governments, the Bank of Canada, Industry Canada, the System of National Accounts, the manufacturing community, consultants and research organizations in Canada, the United States and abroad.