Canada’s manufacturing sales fall sequentially in April

Canada’s manufacturing sales dropped 1.3 percent in April, as compared with consensus expectations of a rise of 0.6 percent. After accounting for price changes the volume of sales fell by an even more severe 1.9 percent on the month. Revisions to the prior months were comparatively minor.

Non-durable goods dropped 1.4 percent in nominal terms and fell 2.3 percent in real terms. Softness was highly concentrated in petroleum & coal shipments with a total of seven facilities shutdown at some point during the month. Stripping petroleum & coal, nondurable shipments rose 1.3 percent, with clothing and leather providing support.

The durables side also dropped 1.1 percent in nominal terms and 1.5 percent in real terms. Here too, the softness was also highly concentrated with other transport equipment – a category that includes armoured vehicles, motorcycles, and skidoos – was down 55.8 percent on the month, pulling the significant transport equipment category falling 2.3 percent in spite of the gains in autos and rolling stock.

Region wise, manufacturing sales dropped in all but four provinces. Saskatchewan led the gains, with N.S. also seeing strong gains. Meanwhile Manitoba and Ontario also rose modestly. Declines were particularly pronounced in P.E.I and energy producing Alberta and Newfoundland & Labrador. Inventories rose 2.2 percent sequentially, with the inventory-to-sales ratio rising sharply to 1.44. Forward looking indicators came in mixed with new orders down 1.6 percent while unfilled orders rose 1.3 percent.

According to a TD Economics research report, the Canadian economy is expected to grow by closer to the midpoint than the higher end of the 2 percent to 3 percent range – around 2.7 percent. However, the softness is highly concentrated, both geographically and sectoryally. Furthermore, it seems to be greatly related to temporary shutdowns related to refinery maintenance and a return to normal levels and a one-off shipment of armoured vehicles to the Middle East.

“On the whole, the Canadian manufacturing sector remains on shaky ground. Rising global demand and a strengthening U.S. economy bodes well for the export-oriented sector, with the weakish loonie also providing support”, added TD Economics.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bearish at -96.2238, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 74.7414. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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