Manufacturing Sales Sees Decline in June Led by Petroleum and Coal Products

By: Sasan Fouladirad

  • In dollar terms, Canadian manufacturing sales fell by 0.8 per cent (m/m) but rose by 18.8 per cent (y/y) in June. This was relatively in line with Statistics Canada’s flash estimate, which called for a 1.0 per cent (m/m) decrease. After accounting for price effects, manufacturing sales volumes rose by 0.1 per cent (m/m) and 5.9 per cent (y/y).
  • Nominal sales (m/m) grew in 13 of the 21 manufacturing subsectors. Sales of chemical manufacturing (+$0.35 million) and transportation equipment manufacturing (+$0.19 million) products contributed the most to total nominal growth. Meanwhile, sales of petroleum and coal product manufacturing finally declined (-$0.9 million) after five consecutive monthly gains.
  • Manufacturing sales (m/m) declined in 8 of the 10 provinces. In growth terms, Newfoundland and Labrador (-23 per cent) and Nova Scotia (-10.8 per cent) had the biggest declines. In nominal terms, New Brunswick had the biggest decline (-$0.24 million), followed by Quebec (-$0.18 million).
  • New orders (m/m) increased by 2.7 per cent, while unfilled orders (m/m) increased by 1.7 per cent.

Key Insights

Over-reliance on the U.S. market could hurt the Canadian auto sector in the long-run. In late July, Canadian automakers were relieved to hear that U.S. lawmakers finally agreed to propose an amendment to the Inflation Reduction Act, which would move away from only providing tax credits to American-made electric vehicles. However, given the protectionist tone of the U.S. lawmakers over the last several years, it would not be surprising to see similar bills or provisions in the future that could potentially hinder investment and manufacturing of electric vehicles in Canada.

Home to key minerals required to manufacture EVs, Canada can use its position to gain leverage on trade negotiations. Canada is the only country in the Western Hemisphere with all the reserves required to manufacture EV batteries. However, the difficulty is that a vast portion of these reserves are located in hard-to-reach places. If done correctly, not only could Canada become a global leader in battery manufacturing but also leverage its position during trade negotiations instead of leaving its auto sector vulnerable to foreign policy decisions.

Further tensions between China and Taiwan could negatively impact the Canadian auto sector. Not only is Taiwan a global leader in manufacturing of semiconductors but is also one of Canada’s largest trading partners. Pandemic-induced supply challenges have highlighted how reliant Canada’s automotive industry is on Taiwanese chipmaking. In 2021, Canada produced the lowest level of light vehicles (~1.1 million) since 1967, with one factor being the disruption in chip supply. It remains to be seen how tensions unfold between China and Taiwan in the upcoming months, but any further escalation would not only have negative ramifications on the supply of semiconductors but also on the Canadian auto sector.