- September manufacturing sales fell 0.2%, 0.7% excluding price impacts
- ‘Transitory’ auto and petroleum plant shutdowns contributed to the drop
- Underlying trends remain soft
Statistics Canada noted that spillovers from the September-October strike by US GM workers were probably behind much of a 4% pullback in motor vehicle parts sale volumes. And petroleum sales were also negatively impacted by maintenance shutdowns. There is room for both to rebound in the near-term, although the looming closer of Oshawa’s GM plant will also weigh on auto output over the winter. Overall sale volumes (I.E., excluding price effects) are still up ~1 1/2% year-to-date through September. That’s far from impressive but also looks comparatively less-bad given broadly softer manufacturing data out of the United States and Europe.
The go-forward outlook for Canadian manufacturing still hinges significantly on whether US-China trade negotiations continue to make progress. The tone of negotiations has improved with a ‘phase 1’ agreement to at least prevent further tariff hikes looking more likely. Anything that eases headwinds for US manufacturers also eases headwinds for their cross-border production chains, including in Canada. But it is also worth remembering that not all Canadian growth challenges are coming from abroad. An easing in trade headwinds would lower the risk of a more severe downside scenario, but would arguably do nothing to ease labour shortages, for example, that businesses have continued to report as a larger impediment to growth than external demand concerns.