CA: Manufacturing Sales

Fri Apr 15 07:30:00 CDT 2016

Consensus Actual Previous Revised
Month over Month -1.5% -3.3% 2.3%
Year over Year 3.9% 5.6% 5.2%

Following their surprising and unrevised surge in January manufacturing sales in February posted their first fall since last October. Additionally, a 3.3 percent monthly drop was more than twice expectations and more than enough to reverse the previous period's gain. As a result, annual sales growth dropped from 5.2 percent to 3.9 percent.

The deterioration in nominal shipments was largely mirrored in volumes which fell a monthly 2.0 percent.

Within the overall nominal monthly decline, sales were down in sixteen of the twenty-one reporting industries. The main areas of weakness were motor vehicles (minus 10.5 percent) and petroleum and coal (minus 12.6 percent). Overall transportation was off 7.6 percent. Amongst smaller declines elsewhere, machinery (2.7 percent) and computer and electronic equipment (5.0 percent) stood out. The only rises of any note were in primary metals (1.3 percent), food (0.5 percent) and drink and tobacco (2.1 percent).

The rest of the survey was equally poor. Hence, new orders slumped some 8.1 percent versus January while backlogs were down 2.3 percent. Although inventories decreased 0.7 percent, the inventory/sales ratio still rose from 1.36 months to 1.40 months. That said, at least this was still well short of the 1.45 month reading a year ago.

Despite February's hefty setback manufacturing sales remain on an upward trend. Indeed, average shipments in January/February were a more than useful 2 percent above their fourth quarter mean. Nonetheless, the BoC's newly upwardly revised estimate of 2.8 percent (saar) first quarter GDP growth is now left looking a touch optimistic.

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.