Quick take

Higher volumes beat back price effects as manufacturing sales climb in August

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  • Canadian manufacturing sales grew by 0.5 per cent (m/m) in August, in line with Statistics Canada’s flash estimate. After accounting for price effects, manufacturing sales grew by 0.6 per cent.
  • Growth in manufacturing sales was broad-based, with 17 of the 21 industries showing higher sales. Petroleum and coal products (+7.3 per cent), furniture and related products (+7.1 per cent), and chemical products (+6.3 per cent) were the main drivers of the expansion. Meanwhile, sales of wood products (-17.1 per cent) and transportation equipment (-5.5 per cent) plummeted.
  • Manufacturing sales grew in five of 10 provinces. New Brunswick (+3.4 per cent) and Nova Scotia (+3.4 per cent) showed the most substantial increases. Sales in British Columbia declined by 4.1 per cent due to lower sales of wood products.
  • Motor vehicle sales fell by 8.7 per cent. Semiconductor shortages are an ongoing bane for producers in this subsector.
  • New orders increased by 1.4 per cent, while unfilled orders grew by 0.3 per cent.

Key insights:

  • A recovering global economy means more demand for Canadian manufacturing products. Sustained growth in primary metal manufacturing (used as an input in construction and many manufacturing subsectors) is indicative of the global recovery underway. Demand for raw and intermediate materials has shot up, driving prices higher. However, while higher prices have powered manufacturing sales recently, much of August’s growth was grounded in higher volumes.
  • While new orders rose in August, fulfilling these orders is becoming increasingly difficult. The pandemic’s fourth wave, combined with a lack of skilled workers, may limit production and hinder sales in the coming months. Supply chain bottlenecks, difficulties in securing raw materials, port delays, shipping container shortages, and increasing costs may also lead to longer order fulfillment times and may drag real volumes. Supply chain disruptions are expected to last at least until spring of next year. Until then, prices for raw materials will remain high.
  • Some countries, like China, are showing signs of slowing growth. This may impact demand for Canadian manufactured goods. It may also exacerbate supply chain problems. Many intermediate goods used in Canadian manufacturing are sourced from China. Lower production there may also signal a slowdown in the United States, which also supplies Canada with intermediate components. These direct and indirect spillover effects may dampen Canadian production.

*All figures in seasonally adjusted dollars unless otherwise specified.

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Kiefer Van Mulligen

Kiefer Van Mulligen

Economist