HomeContributorsFundamental AnalysisCanadian Manufacturing Sales Fell Unexpectedly in October

Canadian Manufacturing Sales Fell Unexpectedly in October

Highlights:

  • Manufacturing sales declined 0.4% with volume sales falling a larger 1.5%.
  • A large drop in sales in the transportation sector – led by a pullback in motor vehicle sales – accounted for the bulk of the volumes drop.
  • A build in inventories implies that production was not as weak as sales. We continue to assume GDP increased 0.1% in October and will rise 2.0% in Q4 as a whole.

Our Take:

The 0.4% dip in nominal manufacturing sales was despite an increase in prices. Sale volumes declined a larger 1.5% to almost entirely retrace increases over the prior two months. A large drop in the transportation sector – led by a 7.6% pullback in motor vehicle sales – accounted for the bulk of the drop in overall sale volumes. Motor vehicle sales were reportedly weak because of transitory production disruptions at some plants. A 1.1% drop in chemical sales was also surprisingly soft given an earlier reported 13% surge in chemical export volumes in October.

Challenges clearly remain in the manufacturing sector going forward, particularly given the possibility for a ‘bad’ outcome from ongoing NAFTA renegotiations. Nonetheless, there are also positives in terms of stronger growth in the U.S. industrial sector, which tends to import a lot from Canadian manufacturers, and a stronger domestic Canadian economy. Looking through monthly volatility, manufacturing sale volumes have been trending modestly higher, and were still up almost 3% on a year-over-year basis in October. In the very near-term, a build in inventories suggests that manufacturing production wasn’t as weak as sales in October. The manufacturing component of GDP probably declined about half a percent in the month but offsetting strength in most services components should still allow for a modest increase in overall GDP in October to build on September’s 0.2% increase.

RBC Financial Group
RBC Financial Grouphttp://www.rbc.com/
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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