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Canadian Manufacturing Sales Retreated 1.5% In July

ByThe National Bank of Canada
Published 09/16/2012, 05:52 AM
Updated 05/14/2017, 06:45 AM
BIG
-1.01%
FACTS:

Canada’s manufacturing sales fell 1.5% in July, after a downwardly revised 0.8% drop in June. Manufacturers in 11 of 21 industries reported lower sales in July, but 80% of the decline was concentrated in transportation equipment, especially motor vehicles (-6.4%) and aerospace products (-22.1%). On a regional basis, sales were down in five out of 10 provinces. New orders dropped 5.6%, but aerospace products (-72%) accounted for most of the decline. Unfilled orders declined 1.2%, with aerospace products (-0.7%), machinery (-2.3%) and fabricated metal products (-1.9%) as the main contributors. Inventories rose 1.0% in July, with half of the increase in aerospace products (+7.4%). The inventory-to-sale ratio increased 0.04 to 1.36 in July. In constant dollars, manufacturing sales decreased 2.0%, after edging down 0.1% in June.
Manufacturing sales retreated sharply in July
Inventory levels in constant dollars
Unfilled orders in constant dollars
OPINION: The drop in manufacturing sales in July means that in volume, sales were below their March level, and well below last December’s post-recession peak (top chart). The manufacturing sector faces strong headwinds with a soft global economic picture and a currency which appreciated 1.4% against the greenback in July and another 2.2% in August. In volume terms, the inventory-to-sales ratio is at its highest since February (middle chart). The clearing of excess inventory limits prospects of increased production in the months to come. But the outlook is not totally bleak, since despite a drop in July, unfilled orders in volume terms remain near their prerecession peak (bottom chart). In the meantime, after one month in Q3, volume sales are down 6.6% annualized from Q2, loosing a big chunk of the 8.2% advance that occurred in the last quarter.

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