Manufacturing Sales Buoyed by Higher Petroleum and Coal Prices in February

Key Insights

Manufacturing sales rose in February, propelled by petroleum and coal sales. In volume terms, however, sales remained weak (m/m). This softness was presaged by estimates from the S&P Global Canada Manufacturing Purchasing Managers’ Index which showed manufacturing activity easing (though hovering near the indicator’s 50.0 no-change benchmark) in February. Sales in several durable goods manufacturing subsectors saw month-over-month growth, including transportation equipment and electrical equipment, appliances, and components. Year-over-year, unadjusted sales of these products were also up significantly (by 12.0 and 16.8 per cent, respectively). Chemical product sales fell sharply (m/m) on weaker sales of pesticides and fertilizers. This drop was amplified by price declines for these goods.

High borrowing costs and cooler demand will likely weaken sales this year, though growth will pick up as the grip of monetary policy loosens. Month to month, real GDP growth in the manufacturing sector has been uneven, though the diversity of the industry’s subsectors has likely helped to keep growth from falling sharply in the face of higher interest rates. However, the sector’s real GDP fell by 0.6 per cent in 2023 and we expect that it will decline further in 2024. The industry’s job vacancy rate has not only returned to its pre-pandemic range but has dipped beneath it, suggesting that hiring is cooling. Employment in manufacturing has also fallen for the last two quarters. These are short-term trends, however. During the next few years, job creation in the motor vehicle manufacturing subsector and an uptick in retirements will strain the sector’s labour supply in several of Canada’s manufacturing-heavy centres.

For more details about Canadian manufacturing and industrial trends, please explore our Industry Lens reports here.