CA: Manufacturing Sales

Tue Dec 15 07:30:00 CST 2015

Consensus Actual Previous Revised
Month over Month -0.5% -1.1% -1.5%
Year over Year -3.2% -3.0% -3.2%

Manufacturing sales posted their third straight decline in October. Following an unrevised 1.5 percent monthly fall in September, shipments were down a further, and steeper than expected, 1.1 percent at the start of the current quarter. Annual growth was steady at minus 3.2 percent.

Volumes were almost as soft, dropping 1.0 percent versus September and now show a yearly drop of also 3.2 percent.

The monthly decrease in headline sales reflected sizeable setbacks in petroleum and coal (5.7 percent), aerospace and parts (10.3 percent) and machinery (4.6 percent). Primary metals (minus 2.4 percent) and miscellaneous industries (minus 6.6 percent) also had a bad month. The only offset of note came via auto sales which jumped 4.9 percent, their fifth gain in six months.

Elsewhere the survey was weak across the board. Hence, new orders shrank 1.4 percent, backlogs were off 1.3 percent and with inventories up 0.5 percent, the inventory/sales ratio climbed 0.02 months to 1.46 months, a 7.4 percent increase from October 2014.

Combined with a sizeable 1.5 percent drop in export volumes, the fall in real manufacturing shipments argues against much of a bounce in October GDP following contractions in both August and September. Just last week BoC Governor Poloz was talking about the range of unconventional policy instruments that the central bank has available should the need be. The economy has not reached that stage yet but with commodity markets still under pressure, 2016 could yet see the monetary stance being loosened once again.

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.