Motor Vehicles Helped Drive Manufacturing Sales Growth in January

In dollar terms, Canadian manufacturing sales rose by 4.1 per cent (m/m) in January. This was higher than Statistics Canada’s flash estimate, which called for a 3.9 per cent (m/m) increase. After accounting for price effects, manufacturing sales volumes rose by 3.8 per cent (m/m).
Nominal sales grew in 16 of the 21 manufacturing subsectors. Sales of petroleum and coal products (+$945 million) and transportation equipment products (+$619 million) contributed the most to total nominal growth. Meanwhile, sales of chemical manufacturing products (-$162 million) saw the sharpest nominal decline.
Manufacturing sales grew in 7 of the 10 provinces, especially in Alberta (+11.5 per cent) and Manitoba (+9.6 per cent).
New orders rose by 7.1 per cent, while unfilled orders rose by 1.0 per cent.

Key insights:

Despite rumours of an impending recession, manufacturing sales held on as the new year began. In January, real sales posted their strongest month-over-month gain since July 2020. Sales growth was primarily based in the petroleum and coal product and motor vehicle manufacturing subsectors. Statistics Canada noted that production of motor vehicles and parts increased in January following the holiday season.
In the past, manufacturing activity has been sensitive to rising interest rates. As the current interest rate cycle unfolds, manufacturing employment and output fell slightly in the fourth quarter of 2022 and may further weaken later this year. Most Canadian manufacturing businesses also expect supply chain issues and inventory maintenance to remain problematic for the next six months. But January and February saw manufacturing job gains. Coupled with January’s strong sales, the sector could post resilient first-quarter results.
The long-term future of Canadian manufacturing hinges on electric vehicle production, advanced manufacturing, and the green transition. Government investment in these areas will likely feature in the forthcoming federal budget to be released later this month. Private capital expenditures in the manufacturing sector are also set to increase by more than almost any other sector in 2023. Although a slowdown in growth is likely this year, the broader outlook for the sector is bright.