HomeContributorsFundamental AnalysisCanadian Manufacturing Sales Dropped in January

Canadian Manufacturing Sales Dropped in January

Highlights:

  • Manufacturing sales dropped 1.0% in January to build on a 0.1% dip the prior month.
  • The bulk of the weakness came from a big 6.1% drop in sales of motor vehicles and parts — due to ‘atypical’ assembly plant shutdowns – and a 9.5% drop in the volatile aerospace component.
  • Ex-transportation products, sales edged up 0.2%
  • Overall sale volumes declined by 1.1%

Our Take:

The 1.0% drop in manufacturing sales overall was somewhat larger than we expected though the details make the headline decline look less worrying. Most of the weakness was accounted for by a big 6.1% drop in motor vehicle and parts sales, reportedly due to ‘atypical’ assembly plant shutdowns that should reverse going forward. The often-volatile aerospace component also dropped almost 10%. Excluding transportation products, sales inched up 0.2% — albeit in large part because of a price-led increase in petroleum & coal sales. Sale volumes declined 1.1% overall but were little changed excluding the transportation component.

Manufacturing production was also stronger than sales in January with inventories rising 0.9%. That, of course, could just be borrowing production from future months if sales don’t bounce back. In the near-term, though, it means the manufacturing sector may have actually added positively to GDP growth in January despite the headline sales drop. Canadian economic data has certainly been more mixed recently than a year-ago when the economy was growing at a (unsustainably-strong) 4% clip per quarter. Reports on retail and wholesale trade sales next week will provide further clarification on the pace of early-2018 growth but for now we think the data is still consistent with further, albeit more modest, improvement at a close to 2% rate in Q1 2018.

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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