Losses in Transportation Equipment Weigh on Manufacturing Sales
December 17, 2019
Focus Area—Canadian Economics
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 October and were lower than a year ago. Manufacturing will therefore, not contribute to real GDP growth in October. However, with manufacturing sales mainly affected by temporary factors, we expect sales volume to rebound in the upcoming months.””
- October’s manufacturing sales edged down 0.7 per cent compared to the previous month, continuing the downward trend started last month.
- The contraction in sales was broad based as 11 out of 21 industries, mainly concentrated in the durable-goods sector, reported reductions in manufacturing sales. In fact, sales in the durable-goods sector stepped back 2.4 per cent while the non-durable goods sector advanced 1.3 per cent.
- However, faced with weakening global growth, the Economic and Fiscal update also included modest projections for economic growth over the next five years.
- Notably, the effects of the United Auto Workers strike were evident in the data as some assembly and part plants saw lower production. This translated into lower sales in the motor vehicle assembly and motor vehicle parts industries.
- Some of the decrease in manufacturing sales was partly offset by large gains in the petroleum and coal product industry, which spiked 6.2 per cent following a month plagued with several maintenance shutdowns at major refineries.
- The food industry also contributed to growth in manufacturing sales thanks to a surge in the sales of meat products in Alberta and Ontario during the month.
- Regionally, sales declines were a theme in central Canada as Quebec and Ontario saw their manufacturing sales slump 0.4 per cent and 3.1 per cent, respectively. Sales were also lower in British Columbia, mostly attributable to lower sales in energy products, and paper and wood product industries.
- Conversely, the Atlantic provinces had a strong month, with New Brunswick and Prince Edward Island posting double digit sales growth, especially in the non-durable goods sector.
- Following the decline in September, the capacity utilization rate in the manufacturing sector rebounded to 80.1 per cent in October. This was partly the result of a pick up in production activity at major refineries and sawmills following months of production interruptions.
- The Economic and Fiscal Update did not include details on numerous spending promises made during the election. These will likely come during a budget early in the new year.
- Overall, the decline in manufacturing sales we saw this morning is inline with our latest forecast which expects weak economic growth to continue into the fourth quarter of this year.