Manufacturing sales tick lower as losses in transportation equipment drag on

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

In volume terms, manufacturing sales inched down 0.4 per cent in December but remain higher than one year ago. December’s decline brings an end to a quarter riddled with challenges. The manufacturing sector in Canada has increasingly become reliant on foreign demand. As the weak global outlook persists into 2020, we expect global factors will continue to take a toll on the manufacturing sector.

  • December’s manufacturing sales declined by 0.7 per cent compared to the previous month, concluding a weak fourth quarter in 2019.
  • The decline in sales was broad-based as 11 out of 21 industries, mainly concentrated in the durable-goods sector, reported reductions in manufacturing sales. Sales in the durable-goods sector contracted 1.3 per cent while the non-durable goods sector only stagnated.
  • Notably, motor vehicle (down 6.8 per cent) and aerospace products and parts (down 15.7 per cent) experienced the largest declines among manufacturing industries. The lower sales numbers reflected the effects of longer seasonal plant shutdowns and the closure of the General Motor plant in Oshawa.
  • Some of the decrease in manufacturing sales was partly offset by large gains in the primary metal industry, which surged 8.7 per cent, rebounding from the sharp decline in November.
  • Regionally, sales went down in 4 provinces with Quebec (down 2.2 per cent) and Ontario (down 1.1 per cent) contributing the most to the decline. Sharp declines in transportation equipment, and plastics and rubber products weighed on growth in Central Canada.
  • Western Canada’s manufacturing sector performed better with British Columbia topping the chart (up 3.3 per cent), thanks to solid gains in primary metal, wood products, energy products as well as transportation equipment.
  • Following the decline in November, the capacity utilization rate in the manufacturing sector edged down 8.0 percentage points to 76.8 per cent in December. This was partly the result of lower production in transportation equipment industries, mainly in the aerospace product and parts, motor vehicle and motor vehicle parts industries.
  • Overall, the decline in manufacturing sales we saw this morning reinforces our latest forecast which expects weak economic growth to continue into the fourth quarter of 2019.

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Joseph Kahenga

Joseph Kahenga

Economist
The Conference Board of Canada