Canada Manufacturing Sales Rise 0.3% In September

Statistics Canada says manufacturing sales rose 0.3 per cent to $51.5 billion in September, boosted by higher sales in the transportation equipment and fabricated metal industries.

Sales were up in 12 of 21 industries, representing 57.1 per cent of the total manufacturing sector.

The 0.3 percent increase in sales topped economists' expectations for a gain of 0.1 percent, though it was a step down from August's hefty 0.9 percent increase.

The transportation equipment industry gained 1.5 per cent to $10.6 billion in September, while fabricated metal product sales increased 2.4 per cent to $2.7 billion.

Despite the September dip in volumes, manufacturing sales should still provide a boost to Canada’s overall economic growth in the third quarter, ‎Toronto-Dominion Bank economist Dina Ignjatovic said.

“Going forward, we expect manufacturing sales to remain healthy,” she said in a note.

New orders increased 2.3% to give a 3.3% on annual basis, although there will be some further concerns surrounding unfilled orders, which fell 0.2% on the month to give a 6.5% annual decline.

Inventories increased 0.5% on the month and, although there was still a 1.2% annual decline, the inventory/sales ratio increased to 1.37 from 1.36 previously.

Sharply lower global commodity prices have weighed heavily on Canada’s economy, which once counted energy products as its top export. The Bank of Canada expected non-resource exports, including manufactured goods, to help make up the difference, but acknowledged recently that progress has been slower than anticipated.

In terms of near-term implications for overall Canadian GDP growth, the details of today's report suggest that manufacturing production (as opposed to sales) likely rose about 0.5% in September. That is consistent with our expectation that GDP rose 0.2% in September and 3.5% (at an annualized rate) in Q3 as activity rebounded following 1.6% drop in Q2 when wildfire-related disruptions, particularly to oil & gas production, weighed on activity.

Economic growth is expected to have snapped back strongly in the third quarter as a whole following a contraction in the previous quarter but that rate is not expected to be sustained in the last three months of the year.

Robert Both, macro strategist at TD Securities, said the fourth quarter was on track for annualized growth of 1.5 percent, in line with the Bank of Canada's recently downgraded forecast.

The Canadian dollar strengthened following the data with USD/CAD declining to 1.3455 from 1.3470, although overall market attention was focused more on wider macro moves including further volatility in oil prices.