Investing.com - Financial Markets Worldwide

Canadian Manufacturing Sales Fall Again In May

ByThe National Bank of Canada
Published 07/18/2012, 08:55 AM
Updated 05/14/2017, 06:45 AM
Facts:

Canadian manufacturing shipments data for May showed a 0.4% decrease in nominal terms. That was much worse than the 0.6% increase which consensus expected. Compounding the bad news was the three-tick downward revision to the prior month to -1.1%. May’s drop in nominal shipments is the fourth in the last five months (top chart).
Manufacturing sales drop
Weakness was broad-based with 13 of the 21 industries seeing decreases in sales. Sales of transportation equipment were strong thanks to autos and the volatile aerospace category which soared 66% after a 35% drop in the prior month. But those gains were more than offset by declines elsewhere, including the near-10% drop in petroleum and coal products, and the second successive decline in machinery sales. In volume terms, shipments rose 0.2%, although that didn’t make up for the prior month's 0.7% drop. The real inventory-to-shipments ratio was flat at an elevated 1.38.
Real shipments currently tracking positive in Q2
Opinion: With May’s small gains in volumes, real shipments are barely in positive territory in Q2 after slumping in the prior quarter (middle chart). So don’t expect a major contribution to GDP from the manufacturing sector in the quarter. It could have been worse though were it not for the auto sector which helped cushion the blow for factories in that quarter. In fact, excluding autos, nominal factory output seems to be contracting in the quarter (bottom chart). It’s unclear if the auto sector can maintain the tempo in the second half of the year given that US consumers, the major recipients of our auto output, are showing signs of moderation. More generally, the softening US economy and the elevated real inventory-to-shipments ratio do not bode well for factory production going forward.
Autos have cushioned the blow for factories in Q2

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