• Canadian manufacturing sales fell 0.2% in February, following a downwardly revised 0.8% increase in January. The release came against consensus expectations for a smaller 0.1% decline. After accounting for price changes, volumes fell 0.5%.
  • Durable good sales fell 1.4% led by declines in motor vehicle assembly (-4.4%) and wood products (-5.9%). Non-durable goods rose 1.2%. Excluding motor vehicles, total sales were up 0.2%
  • Regionally, manufacturing sales fell in six of ten provinces. Ontario (-1.7%) and Saskatchewan (-6.3%) were the biggest contributors to the decline. This was offset by gains in Quebec (+3.7%) and New Brunswick (+7.7%).
  • Inventories increased for a third month, up 0.5%, with the inventory-to-sales ratio at 1.51 (up slightly from 1.5 in January). New orders rose 1.5%, led by transportation equipment (+7.1%).

Key Implications

  • It’s a one step forward, two steps back story for the Canadian manufacturing sector. The pullback in February marks the third decline in four months, and while sales were strong in January, the first quarter will be hard pressed to see an increase, making it two consecutive quarters of retreating sales.
  • For the overall Canadian economy, this echoes other indicators in pointing to a soft quarter for growth. We’re tracking real GDP growth just below the 1% annualized mark, making for a slow start to 2019. Relief may be some way away, as temporary auto plant closures in April will keep a lid on activity heading into the second quarter.


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