Quick take

High Prices Lift Canadian Manufacturing Sales in April

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  • Canadian manufacturing sales rose by 1.7 per cent (m/m) and 24.1 per cent (y/y) in April. This was slightly higher than Statistics Canada’s flash estimate, which called for a 1.6 per cent (m/m) increase. After accounting for price effects, manufacturing sales volumes rose by 0.9 per cent (m/m) and 8.4 per cent (y/y).
  • Nominal sales grew in 15 of the 21 manufacturing subsectors. Sales of transportation equipment (+$591 million) and petroleum and coal products (+$361 million) contributed the most to total nominal growth. Meanwhile, sales of wood products (-$283 million) saw the sharpest nominal decline.
  • Manufacturing sales grew in 6 of the 10 provinces, especially in New Brunswick (+7.5 per cent) and Alberta (+6.5 per cent).
  • New orders increased by 3.1 per cent, while unfilled orders grew by 2.9 per cent.

Key Insights

The wild waxing and waning of commodity prices continues to impact manufacturing subsectors unequally. High energy prices pushed nominal sales of petroleum and coal products up by 3.7 per cent while sales volumes rose by only 0.5 per cent. On the other side of the coin, falling lumber prices pushed nominal sales of wood products down by 6.0 per cent, while real volumes fell by only 1.3 per cent. On balance, after stripping away the impact of rising prices, manufacturing growth in April was mild at best.

Producers are still facing significant headwinds from worker shortages. In April, labour shortages were also exacerbated by a decrease in the average actual hours worked in the manufacturing industry, which fell by 7.0 per cent (m/m). This was partly due to higher absenteeism due to illness or disability.

Representatives from Canada’s aerospace industry have recently raised issues with the planned federal Luxury Items Tax, citing its potential to harm employment in manufacturing by driving down sales. The new tax would apply to motor vehicles, boats, and planes above a certain price threshold. A costing note from the Parliamentary Budget Office estimated that, due to the tax, sales of these items would drop by $321 million in 2022-23 and fall further in subsequent years.

Supply chain problems will persist and delay the delivery of both raw inputs and final manufacturing products. Since April, a potential end to the war in Ukraine – a key contributor to global disruption – has only grown more nebulous. Manufacturers may begin to take a longer-term view of supply chain challenges and invest in means of coping with them. Reshoring and “friend-shoring” for economic or (increasingly) geopolitical reasons may reshape how some Canadian manufacturers procure inputs. But supply chain problems are here at home too. For example, Canfor, one of the largest lumber manufacturers in North America, has cut its production schedule, citing a lack of rail freight capacity that has contributed to soaring inventory buildup at its mills.

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Kiefer Van Mulligen

Kiefer Van Mulligen

Economist

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