Manufacturing sales retreated by 2.1 percent in June from May, slightly better than expectations for a 2.6 percent decline. Real sales also declined 2.1 percent on the month. In year-over-year terms, nominal sales were down 1.8 percent and were down by a bigger 4.3 percent in real terms.

Looking ahead, indicators are bleak as new orders dropped 4.7 percent on the month and unfilled orders fell 0.8 percent.

Inventories rose 0.1 percent in June from July and the inventory-to-sales ratio rose to 1.74 in June from 1.70 in May and 1.72 a year ago.

The unadjusted capacity utilization rate rose to 80.2 percent in June from a revised 79.7 percent in May and compared with 80.8 percent in June a year ago.

On a quarterly basis, total sales fell 0.3 percent, the third consecutive quarterly decline. The decline in the second quarter was driven by a decrease of 4.0 percent in the petroleum and coal products and by motor vehicles, down 3.8 percent.

The weak June showing in manufacturing was widespread with 17 of 21 subsectors down on the month. Transportation was the big driver with a loss of 2.9 percent after two consecutive monthly increases. Within transportation, motor vehicle parts fell 5.6 percent and aerospace products fell 2.9 percent.

Manufacturing sales in June are expected to fall 2.6 percent on the month. This would compare with a 0.4 percent rise in May and a 1.4 percent climb in April.

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.