Manufacturing sales contracted slightly more than expected in October, when they fell 2.8 percent on the month, the largest drop since February. The decrease was mostly due to weaker activity as volumes were down 2.2 percent from September. Sales declined 1.5 percent year-over-year.

Looking ahead, new orders fell 1.0 percent, while unfilled orders were up just 0.2 percent. Inventories increased 0.7 percent on the month, lifting the inventory-to-sales ratio to 1.75 from 1.69, the highest level since June 2020.

The unadjusted capacity utilization rate for the manufacturing sector also moved down to 77.4 percent from 78.6 percent due to lower production.

Over the month, manufacturing sales decreased in 12 sectors, with declines in both durable and non-durable goods industries. Petroleum and coal plunged 10.3 percent as both volumes and prices decreased. Machinery contracted 6.6 percent, which is not an encouraging sign for investment activity in Canada. Transportation equipment fell 2.4 percent despite a 6.9 percent advance in aerospace and parts. Motor vehicles were down 3.5 percent and parts fell 6.0 percent. Sales excluding motor vehicles and parts contracted 2.6 percent.

Regionally, sales declined in six provinces, led by Ontario and Alberta.

Overall, today's report should reassure the Bank of Canada that activity is losing steam, providing breathing room to leave rates unchanged, the question being more and more about how long before rates can be cut again.

After rising 0.4 and 0.7 percent in September and August, manufacturing sales in October are expected to fall back 2.7 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.