| Consensus | Actual | Previous | Revised | |
|---|---|---|---|---|
| Month over Month | 0.8% | 1.2% | 0.3% | -0.1% |
| Year over Year | 0.2% | -1.6% | -2.0% |
Highlights
Canada's manufacturing sales surprised on the upside once again with a 1.2 percent advance in May topping the 0.8 percent consensus, following a downwardly revised 0.1 percent contraction in April. Sales edged up 0.2 percent from a year earlier after a 2.0 percent year-over-year drop in April.
Higher activity was behind May's increase, as volumes rose 2.2 percent from April. Industrial prices were down 1.0 percent on the month.
Overall, 14 of 21 categories recorded higher sales on the month, led by chemical products, motor vehicles, and machinery, with sales increases of 4.8 percent, 4.8 percent, and 4.2 percent, respectively. The increase in machinery is a positive sign for investment activity. Sales excluding motor vehicles and parts were up 0.7 percent. Petroleum and coal was up 0.2 percent. Among the seven categories with lower sales, primary metals, down 6.9 percent, posted the largest decline.
The largest monthly sales increase since October 2022 was accompanied by a 0.6 percent decline in inventories, bringing down the inventory-to-sales ratio to 1.69 from 1.72, the lowest level since January.
But looking ahead, data are not encouraging, as new orders fell 1.3 percent and unfilled orders 1.5 percent.
The unadjusted manufacturing capacity utilization rate rebounded to 80.3 percent from 77.5 percent, making inflationary pressures more likely to continue than not. The utilization rate has been trending up since a low of 75.9 percent in December 2022.
With today's data, Econoday Consensus Divergence Index is at 11, indicative of a slight outperformance of the economy, suggesting risks to monetary policy are tilted toward more tightening. In its latest economic assessment published earlier this week, the Bank of Canada revised its growth forecast to 1.5 percent from 1.0 percent for the second quarter. It expects the economy to keep expanding at the same annualized pace in the fourth quarter, leading to a GDP growth of 1.8 percent this year, revised up from 1.4 percent.
Higher activity was behind May's increase, as volumes rose 2.2 percent from April. Industrial prices were down 1.0 percent on the month.
Overall, 14 of 21 categories recorded higher sales on the month, led by chemical products, motor vehicles, and machinery, with sales increases of 4.8 percent, 4.8 percent, and 4.2 percent, respectively. The increase in machinery is a positive sign for investment activity. Sales excluding motor vehicles and parts were up 0.7 percent. Petroleum and coal was up 0.2 percent. Among the seven categories with lower sales, primary metals, down 6.9 percent, posted the largest decline.
The largest monthly sales increase since October 2022 was accompanied by a 0.6 percent decline in inventories, bringing down the inventory-to-sales ratio to 1.69 from 1.72, the lowest level since January.
But looking ahead, data are not encouraging, as new orders fell 1.3 percent and unfilled orders 1.5 percent.
The unadjusted manufacturing capacity utilization rate rebounded to 80.3 percent from 77.5 percent, making inflationary pressures more likely to continue than not. The utilization rate has been trending up since a low of 75.9 percent in December 2022.
With today's data, Econoday Consensus Divergence Index is at 11, indicative of a slight outperformance of the economy, suggesting risks to monetary policy are tilted toward more tightening. In its latest economic assessment published earlier this week, the Bank of Canada revised its growth forecast to 1.5 percent from 1.0 percent for the second quarter. It expects the economy to keep expanding at the same annualized pace in the fourth quarter, leading to a GDP growth of 1.8 percent this year, revised up from 1.4 percent.
Market Consensus Before Announcement
Manufacturing sales, which have been swinging back and forth along a declining trend, are expected to rise 0.8 percent in May after gaining 0.3 percent in April.
Definition
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).
Description
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.
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.
