Quick Take

Manufacturing sales bounce back in third quarter

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The Conference Board of Canada’s economist, Joseph Kahenga, offers the following insights on today's manufacturing sales data:

With September numbers in, manufacturing sales rebounded a staggering 26.6 per cent in the third quarter, following the sharp decline in the second quarter of the year. Growth was widespread across industries and regions. Higher prices for lumber, coupled with sharp increases in exports of forestry products and building and packaging materials, supported growth in the wood industry while higher sales of pharmaceuticals and medicine amid the pandemic led to higher sales in chemical manufacturing. Looking ahead, the pace of recovery in manufacturing will ease as rising COVID-19 cases put a dent in economic activity and trade.

  • September saw a 1.5 per cent increase in Canadian manufacturing sales on a month-over-month basis, which more than offset the loss incurred in August.
  • Overall, this morning’s data brought growth in the third quarter to 26.6 per cent, nearly shrugging off the staggering 21.6 per cent loss incurred in the second quarter.
  • Growth was broad-based, as 15 out of 21 industries recorded gains during the month. Sales in the durable-goods sector grew 1.2 per cent, while the non-durable goods sector gained 1.9 per cent in sales.
  • Notably, sales in wood product manufacturing (up 9.6 per cent), and chemical manufacturing (up 6.7 per cent) posted the largest gains. Incidentally, both industries also had the largest contribution to growth in September.
  • Strong sales growth in the wood industry was on the back of higher prices for lumber and other wood products (up 6.3 per cent) and higher volumes as exports of forestry products and building and packaging materials sharply increased in September. Higher sales in chemical manufacturing were mostly attributed to higher pharmaceutical and medicine sales.
  • In contrast, the sharpest losses were recorded in miscellaneous manufacturing (down 4.8 per cent) and at textile mills (down 1.2 per cent).
  • Yet declines in miscellaneous manufacturing, primary metal manufacturing (down 1.2 per cent) and machinery manufacturing (down 0.9 per cent) weighed the most on sales growth.
  • In volume terms, manufacturing sales actually edged up 2.1 per cent, implying deflationary pressures on product prices as the economy faced localized shutdowns in dealing with the second wave of the virus.
  • Regionally, nine provinces posted gains in manufacturing sales in September, with Alberta (up 3.9 per cent) topping the chart, thanks to higher sales of chemical and wood products. Meanwhile, sales were 2.2 per cent lower in Saskatchewan due to losses in the non-durable goods sector.

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Joseph Kahenga

Joseph Kahenga

Economist

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