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Manufacturing Sales Notched Up in August, but Strife May Be in Store

Canadian Economics

By: Kiefer Van Mulligen

  • In dollar terms, Canadian manufacturing sales grew by 0.7 per cent (m/m) in August. This was smaller than last month’s Statistics Canada’s flash estimate for August, which called for a 1.0 per cent increase. After accounting for price effects, real manufacturing sales volumes fell by 0.7 per cent (m/m).
  • Nominal sales grew in 9 of the 21 manufacturing subsectors. Sales of petroleum and coal products (+$806 million) and food products (+$191 million) grew the most. Meanwhile, sales of fabricated metal products (-$164 million) saw the sharpest nominal decline.
  • Manufacturing sales grew in 7 of 10 provinces. In relative terms, sales fell the most in Saskatchewan (-1.9 per cent) and grew the most in Newfoundland and Labrador (+23.7 per cent).
  • New orders grew by 2.8 per cent, while unfilled orders fell by 0.5 per cent.

Insights

Manufacturing sales rose in August, but largely on the back of higher prices. In real terms, sales fell slightly. Despite the drag of higher prices, real food product sales have been trending higher and grew by 0.9 per cent in August. However, food manufacturing sales may soon be impacted by federal attempts to limit food price growth. The remedies for high food price inflation haven’t been disclosed yet, but if retailers’ profit margins are squeezed by new rules, then there may be spillover effects for the food manufacturing subsector. In September, Industry Minister François-Philippe Champagne also met directly with domestic food manufacturers to discuss the high cost of groceries. Since February 2019, nominal food manufacturing sales have increased by 38.3 per cent while real sales have grown by only 7.1 per cent.

Unrest in the North American auto sector could drag manufacturing sales in September and October. Labour action at three Ontario auto facilities was short-lived after GM and Unifor reached a tentative agreement within a day of the strike’s onset. However, ongoing strikes at several auto plants in the United States (which expanded to Ford’s largest factory last week) could spread disruption to Canada. Faltering production south of the border could impair the tightly linked auto supply chains between the two countries, recalling the impact of the Ambassador Bridge blockade last year.

Geopolitical conflicts will continue to have limited direct near-term effects on Canadian manufacturing. Beyond their incalculable human toll,the conflicts in Gaza and Ukraine, as well as simmering tensions between China and Taiwan, could push commerce and trade toward increasing regionalization and could change how domestic manufacturers operate over the medium term. As at the height of the pandemic, global supply chains may need to be revamped if geopolitical tensions continue to ratchet up. Impacts on commodity prices – particularly the price of oil – could have widespread economic effects. Regionalization could also curb exports and may hinder investment in new manufacturing projects.

Person welding metal

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

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