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Defying Challenging Economic Conditions, Manufacturing Sales Rise in April

Canadian Economics

By: Kiefer Van Mulligen

    

  • In dollar terms, Canadian manufacturing sales rose by 0.3 per cent (m/m) in April. This was higher than Statistics Canada’s flash estimate, which called for a 0.2 per cent decline. After accounting for price effects, manufacturing sales volumes rose by 0.8 per cent (m/m).
  • Nominal sales grew in 9 of the 21 manufacturing subsectors. Sales of transportation equipment products (+$559 million) and petroleum and coal products (+$370 million) contributed the most to total nominal growth. Meanwhile, sales of primary metal products (–$328 million) saw the sharpest nominal decline.
  • Manufacturing sales grew in 3 of 10 provinces. In relative terms, sales fell the most in Newfoundland and Labrador (–13.7 per cent) and grew the most in Ontario (+1.9 per cent).
  • New orders grew by 2.9 per cent, while unfilled orders fell by 0.2 per cent.

Key insights:

  • Manufacturing sales’ real gain in April highlights the sector’s resilience amid gloomy economic circumstances. Sales of motor vehicle parts—one of the key drivers of overall sales in April—were pushed to their highest level on record as improved supply chains have allowed manufacturers to catch up on order backlogs. Conversely, wood manufacturing sales fell by 5.5 per cent in April. Untamed wildfire activity in many Canadian provinces will have a negative—if temporary—impact on lumber production and sales in May and June’s data. Fires have already led to the closure of some lumber mills in Quebec, and the season is only beginning.
  • The Bank of Canada’s reignition of interest rate hikes in June signals that demand remains too strong. And stronger-than-expected inflation and growth figures in recent months could entail another hike in July. As monetary policy tightens further and the full effects of previous hikes appear, sales of interest rate-sensitive durable goods (including motor vehicles and parts) will likely weaken. But employment in the manufacturing sector has held up so far this year. New orders also increased in April, which could imply that this weakness won’t appear in May.
  • The magnitude of subsidies offered by the United States Inflation Reduction Act (IRA) has set high expectations for private corporations seeking to invest in countries other than the U.S. The passage of the IRA is the primary spur behind the generous Canadian subsidies to Volkswagen and Stellantis. However, Finance Minister Chrystia Freeland has warned of the potential for a race to the bottom as countries compete for green investment. The new battery plants built by these two firms will likely generate many new jobs and billions of dollars worth of economic benefits. But, as with many investments, outlays on these projects represents a bet that the benefits of this spending will outweigh the costs. Electric vehicle battery technology may change significantly even in the near term. Whether this could erode some of the benefits these investments provide should be considered carefully—especially as the costs continue to rise.
Person welding metal

For more details about Canadian manufacturing and industrial trends, please explore our Industry Lens reports.

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