Manufacturing sales unexpectedly expanded 0.4 percent in September, while forecasters in an Econoday survey had expected a 0.1 percent contraction. Sales rose 3.3 percent year-over-year.

Despite the stronger-than-expected headline number, the report did not reflect a robust manufacturing activity, as evidenced by the 0.6 percent contraction in volumes.

The unadjusted capacity utilization rate for the manufacturing sector also moved down to 78.9 percent from 80.2 percent, with declines in both durable and non-durable industries.

Looking ahead, the picture is not encouraging, with new orders down 1.7 percent and unfilled orders down 1.2 percent. Overall, Econoday's Relative Performance Index is currently at minus 2, consistent with a stable monetary policy.

Inventories rose 1.5 percent on the month, lifting the inventory-to-sales ratio to 1.70 from 1.68.

The sector breakdown showed that manufacturing sales increased in less than half of 21 subsectors, led by a 6.3 percent gain in petroleum and coal and a 1.3 percent advance in machinery. On the downside, chemicals fell 1.8 percent and motor vehicles parts decreased 2.6 percent. Sales excluding motor vehicles, parts and accessories were up 0.5 percent in September.

In the third quarter, nominal sales increased 1.3 percent, led by petroleum and coal as well as food.

After rising 0.7 and 1.6 percent in August and July, manufacturing sales in September are expected to slip 0.1 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.