CA: Manufacturing Sales

Tue Sep 19 07:30:00 CDT 2017

Consensus Actual Previous Revised
Month over Month -1.5% -2.6% -1.8% -1.9%
Year over Year 3.4% 6.2% 6.4%

Manufacturing sales tumbled a greater than anticipated 2.6 percent in July following a revised 1.9 percent decline in June. This was the second consecutive decline after three increases in sales. Expectations were for a decline of 1.5 percent. The decrease was primarily the result of lower sales of motor vehicles and motor vehicle parts partially due to annual plant closures in July. Excluding motor vehicles and motor vehicle parts, manufacturing sales increased 0.2 percent. On the year, total sales were up 3.4 percent after rising 6.4 percent in June. Sales were down in 9 of 21 industries, representing 57 percent of the manufacturing sector. Sales of durable goods decreased 4.6 percent, while sales of non-durable goods declined 0.2 percent.

Transportation equipment industry dropped 13.8 percent in July for a second consecutive monthly decline. This is the largest monthly decrease since May 2009. The decrease was the result of declines in the motor vehicle (down 19.9 percent) and the motor vehicle parts (down 11.3 percent) industries. Motor vehicle assembly plants have annual shut downs during the summer months. This year, the shutdowns were longer and more concentrated in the month of July compared with previous years. Changes to vehicle models being manufactured in Canada also contributed to the decline.

Food industry sales declined 0.9 percent particularly in the meat product and seafood product and packaging sub-industries. These declines were partially offset by increases in wood products (2.3 percent), primary metals (1.9 percent) and non-metallic mineral products (4.4 percent).

Unfilled orders fell 1.7 percent, the third consecutive monthly decline. Most of the decrease was due to a drop in unfilled orders in the aerospace product and parts. These declines were partially offset by an increase in unfilled orders in machinery and fabricated metal products.

New orders declined 1.7 percent. The decrease mostly reflected lower new orders in motor vehicles, and in aerospace product and parts. These declines in July were partially offset by higher new orders in fabricated metal products and in computer and electronic products.

Notwithstanding the disappointment, the Bank of Canada is more likely to stick to its outlook than not, since it has already factored in an economic slowdown in the third quarter, when it sees the annualized real GDP growth slowing to 2.0 percent from 3.0 percent in the second quarter.

Manufacturing sales for twenty-one reporting industries are the Canadian dollar level of factory shipments for manufacturing durable and nondurable goods. Volume figures are also provided. The sales statistics form part of a wide monthly report that encompasses information on new orders, backlogs and inventories and is a key input into forecasts of monthly gross domestic product (GDP).

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.