Manufacturing Sales Show Signs of Life

Canadian manufacturing sales rose by 4.3 per cent (m/m) in October. In volume terms, sales increased by 3.1 per cent.
The increase in sales is a marked improvement over the 2.8 per cent contraction in September.
Manufacturing sales rose in 6 of 10 provinces. Ontario posted the largest increase (+8.6 per cent), while Alberta (+2.9 per cent) and B.C. (+2.5 per cent) also saw significant gains.
Sales grew in 7 of 21 industries. Sales of motor vehicles (+61 per cent) and motor vehicle parts (+23.1 per cent) showed the strongest gains. Meanwhile, sales in aerospace (-8.3 per cent) fell more than any other manufacturing segment.
New orders rose by 1.9 per cent, while unfilled orders were essentially flat.

Key insights:

Transportation equipment continues to be the engine that drives manufacturing sales. Supply chain disruptions have been hurting production across all manufacturing segments, but automakers are feeling the brunt of them. While this morning’s release signals that supply bottlenecks are improving, manufacturers are not out of the woods yet. In volume terms, sales are still well below where they were pre-pandemic (February 2020), and we don’t expect much improvement until the second half of 2022.
Rising consumer prices have understandably made headlines in recent months. But the story doesn’t end there. Prices for capital surged in the third quarter of 2021, and businesses across many sectors (manufacturing included) have been telling us that higher prices for capital are hurting their investment plans. This is a concerning development for the Canadian economy as a whole—when less capital is being purchased, it has a lasting impact on the country’s potential economic growth.
Labour shortages are posing a problem for Canadian manufacturers. Earlier this year, the job vacancy rate for the sector reached its highest level on record, dating back to 2015. Muted levels of immigration stemming from the pandemic and a high number of unemployed workers refusing their offered wages are two key reasons for the tight labour supply. While these issues are likely to get better next year, labour shortages will continue to be a hurdle for manufacturers over the long term.