- Manufacturing sales increased 1.6% in May
- Gains concentrated in the transportation sector
- Increase extends recent string of Canadian manufacturing outperformance relative to US
The increase in manufacturing sales in May was, as expected, largely concentrated in the transportation sector. Still, sales edged up 0.2% excluding transportation components, and have yet to decline on that basis in any month of this year. To be sure, growth in the Canadian manufacturing sector has not exactly been spectacular – but sales volumes (i.e. excluding price impacts) were still up 3.5% from a year ago in May and 2.0% year-to-date in 2019. Production (as opposed to sales) in the sector is on track to increase for a second straight quarter in Q2 – better than the US where manufacturing output has now declined for two straight quarters alongside an escalation in US-China trade tensions.
To be sure, tight integration of cross-border US-Canada production chains means Canada will not be immune to any broader trade-related global industrial sector slowdown. For now, though, the domestic economic data continues to look a little better. And, with inflation also holding around 2%, is another reason the Bank of Canada won’t likely need to rush to follow the US Fed with a widely expected rate cut later this month.