Manufacturing sales continued to rise in May, up 0.4 percent, after a revised 1.4 percent increase in April. The May increase topped expectations for a 0.2 percent gain. Real sales also gained 0.4 percent on the month, which means a higher volume of goods was sold. In year-over-year terms, nominal sales were down 1.8 percent and declined a bigger 3.0 percent in real terms.

Looking ahead, indicators generally suggest further recovery, as new orders rose 1.0 percent on the month and unfilled orders rose 0.8 percent.

Inventories rose 0.2 percent, and the inventory-to-sales ratio was unchanged at 1.70 in May from April and versus 1.69 a year ago.

The unadjusted capacity utilization rate was up a big 1.9 points to 80.3 percent in May from 78.4 percent in April and 80.4 percent in May a year ago.

Aerospace was the big driver of May's increase with a gain of 11.2 percent after a decline of 6.1 percent in April as the sector continues to recover from weakness during the pandemic. Aerospace orders at $2.7 billion were the highest on record. Food products were a big winner too, up 1.4 percent.

On the downside, motor vehicle sales fell back by 4.2 percent in May after jumping by 5.1 percent in April. A retooling of an auto assembly plant in Ontario accounted for most of the decline. On the positive side, exports of motor vehicles rose 3.8 percent, mostly due to rising light truck sales to U.S. customers.

Regionally, six of 10 provinces reported increases in May from April, led by Quebec, up 1.2 percent on the aerospace jump, and Ontario, up 0.5 percent. Saskatchewan was the big downer with a decline 0f 13.1 percent, mostly reflecting a 15.5 percent drop in sales of non-durable goods.

Manufacturing sales in May are expected to rise 0.2 percent on the month. This would compare with a 1.1 percent gain in April and 1.8 percent fall in March.

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.