Higher Sales of Motor Vehicles Offset Falling Sales of Aerospace Products in April

Key insights

Sales of transportation equipment drove Canadian manufacturing sales up in April. Seasonally adjusted sales of motor vehicles expanded by 5.6 per cent which helped to offset the 6.8 per cent decline in sales of aerospace products. While aerospace product sales fell, unfilled orders for these items rose year-over-year. Statistics Canada’s report attached to today’s release also mentioned that several auto manufacturing plants underwent retooling in April, which weighed on sales in the industry. As a positive omen for near-term sales, new orders for Canadian manufacturing products swung upward by 3.1 per cent in April after a large 4.7 per cent decline in March.

The impasse between some of Canada’s railways and the Teamsters Rail Conference is casting a shadow over the manufacturing sector. The Canadian Industrial Relations Board will determine whether a rail strike that could see more than 9,000 workers walk off the job would threaten the health and safety of Canadians. Until a determination is made, labour action has likely been delayed until mid-July at the earliest. Most manufacturers believe that a work stoppage would have a “significant or severe” impact on business operations and could drive costs higher. But the uncertainty surrounding any future disruption has already had a material impact on Canadian supply chains, as some freight carriers have redirected trade away from ports in Vancouver and Prince Rupert. Bargaining between the union and the Canadian National Railway and the Canadian Pacific Kansas City Railway appears to have stalled.

Monetary policy easing will usher in brighter days for the manufacturing industry. In June, the Bank of Canada lowered its policy interest rate by 25 basis points to 4.75 per cent. Though the move was modest, we expect that more cuts will be in store in 2024. The Bank of Canada’s inaugural cut during this cycle also signals its expectation that the pace of price growth is generally under control. After several years of elevated inflation, this will come as a relief to manufacturers and should improve business confidence. Looser monetary policy will incentivize more manufacturing investment, improve the sector’s productivity, and ultimately foster conditions to support output and sales growth.