Manufacturing sales advanced 0.7 percent in August, less than the 1.0 percent consensus in an Econoday survey. In fact, activity was weaker than the headline number suggests as volumes, more relevant to real GDP, contracted 0.7 percent on the month.

The price-driven increase in monthly sales was concentrated in 9 out of 21 subsectors, with a tale of two stories: a 2.7 percent increase in non-durables and a 1.1 percent contraction in durable goods industries.

On the upside, a 10.5 percent increase in petroleum, a 1.5 percent advance in food and a 2.4 percent gain in machinery, boosted sales. By contrast, motor vehicles sales fell 1.5 percent and parts were down 0.9 percent. Excluding these two subsectors, manufacturing sales rose 1.0 percent. Fabricated metals and miscellaneous sales also decreased.

The impact of the port strike in British Columbia on the manufacturing sector was smaller in August than in July. At the national level, 8.4 percent of manufacturing plants said they were impacted by the strike in August, mainly through shortages of raw materials and transportation disruptions.

With inventories down 0.1 percent, the inventory-to-sales ratio edged down to 1.69 from 1.70, its lowest level since January this year.

Looking ahead, new orders rose 2.8 percent in August, more than erasing the previous month's 0.1 percent dip. Unfilled orders were up 0.5 percent.

The unadjusted capacity utilization rate for the manufacturing sector rose 2.6 percentage points to 80.2 percent on higher production. Durable-goods industries were up 3.7 percentage points to 80.5 percent and non-durables up 1.6 percentage points to 80.0 percent.

Despite the slowdown in the pace of sales growth and the contraction in real sales, Econoday's Relative Performance Index is at 36, consistent with building tightening risk.

After rebounding a surprising 1.6 percent in July, manufacturing sales in August are expected to rise a further 1.0 percent.

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.