- Canada’s manufacturing sales grew 2.1% (m/m) in June, slightly above Statistics Canada’s flash estimate for a 1.9% increase. The picture was similar after accounting for price effects, with manufacturing shipment volumes up 2.2% on the month.
- The increase in manufacturing shipments was predominantly led by the motor vehicles industry, where sales increased 25.6% on the month. Sales of petroleum and coal products (+5.2%) and aerospace products and parts (+21.7%) were also notably strong. A decline in wood product sales (-5.7%) provided some offset.
- Forward looking indicators were positive, with new orders up 11.1% and unfilled orders up 1.4%. Inventories increased 1.9%, but higher sales kept the inventory-to-sales ratio unchanged at 1.56.
Key Implications
- After an unusually weak May report, Canada’s manufacturing sales showed some signs of life in June. However, while output in the auto industry has partially recovered, production levels remain low as a result of the global shortage in semiconductor chips. Recent reports from auto manufacturers suggest that we aren’t out of the woods yet, with some citing that shortages may continue to cloud the outlook into next year.
- Looking ahead, the macro backdrop remains supportive for the manufacturing sector, with near-term indicators pointing to continued expansion. New orders posted a solid increase in June, and manufacturing sentiment remains firmly in expansion territory, as evidenced by recent PMI readings. Meanwhile, hours worked in the sector recorded a decent increase in July. Importantly, the strong economic performance in Canada’s largest trading partner (the U.S.) bodes well for the sector.
