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Do Falling Manufacturing Sales in June Signal Further Weakness Ahead?

Canadian Economics

By: Kiefer Van Mulligen

  • In dollar terms, Canadian manufacturing sales fell by 1.7 per cent (m/m) in June. This was a milder decline than Statistics Canada’s flash estimate, which called for a 2.1 per cent decrease. After accounting for price effects, manufacturing sales volumes fell by 1.0 per cent (m/m).
  • Nominal sales grew in 7 of the 21 manufacturing subsectors. Sales of primary metal products (+$291 million) and transportation equipment products (+$248 million) grew the most. Meanwhile, sales of petroleum and coal products (–$715 million) and chemical products (–$404 million) saw the sharpest nominal decline.
  • Manufacturing sales grew in 5 of 10 provinces. In relative terms, sales fell the most in Saskatchewan (–14.5 per cent) and grew the most in Newfoundland and Labrador (+13.0 per cent).
  • New orders increased by 1.2 per cent, while unfilled orders rose by 0.2 per cent.

Key insights

  • June’s sharp sales drop may be an early sign of a contraction in the manufacturing sector. The pace and magnitude of interest rate increases over the last two years suggest that more turbulence is in store for Canadian manufacturing. Weakness was widespread in June, though sales of petroleum and coal products fell by 8.3 per cent and contributed the most to the month’s overall decline. Statistics Canada’s report highlights the “widespread slowdowns in economic activities as well as lower international trade” as a key driver of the decline in petroleum and coal product sales. However, wildfire activity in Alberta likely contributed to some of the weakness in petroleum production, with oil and gas firms scaling back production in response. With the fire season far from over, the negative effects of wildfires on the oil and gas sector—and other sectors, like wood product manufacturing—may continue for several months.
  • Next month’s sales figures will reveal some of the negative impacts on Canada’s economy prompted by labour action at British Columbia’s ports. The abrupt halt to most imports and exports along the west coast led to production cutbacks across the country, including at lumber mills in B.C. and potash facilities in Saskatchewan.These curtailments will put a dent in overall sales in July. However, the impacts of the strike may also further obscure underlying economic signals in July’s manufacturing data. This could make identifying a potential turning point in the economic cycle more difficult.In our most recent national forecast, we expect manufacturing output to contract in the third quarter of 2023, though it will start to pick up again in the fourth quarter.
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For more details about Canadian manufacturing and industrial trends, please explore our Industry Lens reports.

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