Canada’s manufacturing sales rise above expectations in May

Canada’s manufacturing sales rose in May, coming in above market expectations. Manufacturing sales rose 1.1 percent, as compared with market expectations of a rise of 0.8 percent. However, April’s print was downwardly revised to a rise of 0.4 percent from the initial print of 1 percent rise. After accounting for price swings, the volume of sales rose 1.1 percent on the month. However, April’s print was downwardly revised to a drop of 0.2 percent as compared with the initial print of a 0.5 percent rise.

The rise was mainly driven by durables that rose 2.2 percent in May. Within durables, motor vehicles and motor vehicle parts grew 8.6 percent and 5.7 percent, respectively. Meanwhile, nondurables were little changed, dropping 0.3 percent as rises in chemicals and paper were countered by declines in petroleum and coal products and food.

Region wise, manufacturing sales rose in six provinces, led by N.S., Ontario, B.C. Shipments rose 1.3 percent in Alberta and N&L, while P.E.I and N.B. saw the largest losses. Inventories dropped 0.2 percent on the month, with the inventory-to-sales ratio dropped slightly to 1.35. Forward looking indicators were dismaying with new and unfilled orders dropped 3.6 percent and 1.5 percent, respectively in May.

May saw a good month for Canada’s manufacturing, but April’s figures were downwardly revised dampening the enthusiasm slightly. Still, the strong volume print in May implies healthy activity in the second quarter, with the performance supportive of economic growth that should come in around 3 percent in the second quarter, stated TD Economics in a research report.

However, this performance is unlikely to last. Leading indicators, including new and unfilled orders, were greatly disappointing with both metrics down sharply in the month, although some solace is to be had in industrial production in the U.S. manufacturing and auto sector that rose 0.2 percent and 0.7 percent, respectively, in June.

In all, while continued U.S. growth is likely to stay supportive of Canadian manufacturing activity, the recent spike in the loonie’s value on account of tighter monetary policy by the Bank of Canada would likely pose some downside to growth, added TD Economics.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 50.8164, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -92.5484. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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