Canada: Manufacturing sales fell again in October, to weigh on growth – NFB

The report released on Tuesday showed that manufacturing shipments dropped for the second month in a row in October, with a decline of 0.2%, worse than market expectations.  National Bank of Canada analyst, Kyle Dahms, explains that in volume terms, both shipments and inventories marked deteriorations which should translate into a negative contribution to growth in October from the manufacturing sector.

Key Quotes:

“After a slight decline in September, manufacturing sales disappointed consensus in October with a deeper pullback. The main source of the monthly contraction was the transportation equipment category. Specifically, the category weakened on the back of lower sales for motor vehicles assembly (-4.7%) and parts (-4.6%) as well as aerospace parts/products (-1.2%). That said, production for motor vehicles/parts was impacted by the UAW strike and is likely to bounce back in the next report as the strike ended in late October.”

“The petroleum and coals products category rose 6.2% in the month after four consecutive monthly declines. This reflects the end of shutdowns for maintenance at several major refineries.”

“While manufacturing sales have experienced an impressive run since 2016, global uncertainties could have weighed as shipments peaked in May of this year and registered four pullbacks in the five months since then.”

“The unadjusted capacity utilization rate in Canada’s manufacturing sector rose from 79.3% in September to 80.1% in October.”