Manufacturing sales fell 0.9 percent in May from April, slightly better than the 1.3 percent drop anticipated in the Econoday consensus forecast. Still, this is a gloomy result that put sales at their lowest since January 2022, and confirms the Bank of Canada's expectation that the economy would weaken"considerably" in the second quarter largely in response to tariffs.

Sales for April were revised to show a 2.7 percent decline from March from the 2.8 percent previously reported. Sales were down 4.1 percent in May from a year ago.

Much of the decline reflected decreases of 8.4 percent in sales of oil and coal products and 2.7 percent in machinery. The overall decline reflected weaker activity as real sales were down 0.7 percent, with the industrial product price index down 0.5 percent.

The 0.9 decrease would have been worse if not for a 6.9 percent jump in aerospace and parts on the month.

In response to a special question, manufacturers said the impact of tariffs was less in May than in April. Stats Can said,"In May, nearly half of manufacturers reported being impacted by the tariffs, a decrease of about 10 percentage points from April. The impacts in May were most pronounced through price increases (reported by one-quarter of respondents), higher expenses for raw materials, shipping or labour (reported by one-fifth) and changes in demand for products (reported by one-fifth). Although the precise sales lost due to the tariffs cannot be quantified, data suggest that sales of transportation equipment, machinery and primary metals were most affected in May. Ontario experienced the largest decline in sales attributable to the tariffs, compared with other provinces."

Forecasters agree with the Statistics Canada preliminary estimate that sales fell 1.3 percent in May after dropping 2.8 percent 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.