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Canadian Manufacturing Sales Rise 1.7% In November

ByThe National Bank of Canada
Published 01/21/2013, 04:55 AM
Updated 05/14/2017, 06:45 AM
FTNMX552010
-0.52%
FACTS:

Canadian manufacturing shipments rose 1.7% in November, topping consensus expectations. There was also a 2-tick upward revision to the prior month to -1.2% (from -1.4%). In November, sales rose in 12 of the 21 broad industries. There were sharp gains in transportation equipment (+3.8%), chemicals (3.9%) and primary metals (+5.9%) among others. More than offsetting declines in categories including food manufacturing. New orders rose 6.2%. The inventory to sale ratio fell to 1.31, an eight-month low. In real terms, shipments rose 1.6%, although not making up for October's 2.2% slump. Despite November’s gains, shipments (both nominal and real) are still below their levels of December 2011, and well below the prerecession peak (top chart).

Factory shipments rise in November
OPINION: The Canadian manufacturing shipments report was better than expected, although that didn't compensate for the prior month's slump. A post-Sandy rebound in US demand may be helping factories on this side of the border. Brisk US auto sales are also helping boost Canadian exporters (middle chart).
Benefiting from the US auto recovery
The increase in volumes should help support November GDP, while the increase in new orders suggest the factory rebound has legs, i.e. perhaps a decent December number too (bottom chart).
New orders suggest factory rebound has legs
But given the weak start of the quarter, factories may still end up being a drag on Q4 GDP. With two months of data, real factory shipments are down 3.4% annualized in the final quarter of 2012. It will take an increase of 1.8% or so in December volumes to allow real shipments to remain flat in Q4. For now, we still expect 2012Q4 GDP growth to end up below 1% annualized.

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