- February sales increased 0.5%, but sales will fall sharply in March
- February sales already impacted by COVID-19 and rail blockades
- Preliminary GDP report for March reported yesterday reiterated much worse to come ahead
Manufacturing sales managed to edge up 0.5% in February despite significant disruptions from rail blockades and disruptions tied to COVID-19. The former disruptions have eased, the latter clearly have not. 9% of respondents in Statistics Canada’s manufacturing survey reported disruptions due to COVID-19 in February already, and that number is obviously much higher today. Yesterday’s advance GDP estimate for March from Statistics Canada flagged a 9% drop in March output – by a wide margin the largest monthly decline on record. The service-sector probably led that downturn more than usual given the dramatic impact of social distancing policies on industries like education, accommodation & food services, and retail. But manufacturing output also clearly slowed. Hours worked in the manufacturing sector already fell 7% as of mid-March with more declines to come.
If social-distancing-related shutdowns weren’t enough, manufacturing output will also be disrupted for months to come by global supply chain issues given the wide scale of shutdowns abroad, particularly in the US. US manufacturing output fell more than 6% in March (the biggest one-month decline since the end of WWII), and that is despite social distancing policies only really ramping up in the second half of the month. The light at the end of the tunnel remains that the virus spread does seem to be easing – in Canada particularly in the Western provinces. Provided those trends hold, eventually social distancing measures will indeed be relaxed. In mean-time, the economy will have to rely on the growing list of household and business income supports from governments and monetary policymakers to help bridge the gap to better days.
