Canada’s manufacturing sales rise in September, likely to remain healthy for rest of 2016

Canada’s manufacturing sales rose for the fourth consecutive month in September. The print for September came above consensus projection. Canada’s manufacturing sales grew 0.3 percent sequentially, after rising 0.9 percent in August. This is more than the forecast of 0.1 percent gain. But the gain was totally a price story, as the volume of sales fell 0.2 percent, noted TD Economics in a research report.

Transportation equipment sales grew 1.5 percent and accounted for most of the gains, with railroad rolling stock, aerospace and motor vehicles all increasing in sequential terms.  Fabricate d metal products grew 2.4 percent after declining for two months. This is the strongest rise in 18 months. This has countered a drop in primary metal products.

Regionally, manufacturing sales grew in half the provinces. Quebec and Ontario led the increase, with them recording a rise of 1.7 percent and 0.3 percent, respectively. The Maritime Provinces registered the biggest declines.

Inventories rose 0.5 percent sequentially in September, raising the inventory-to-sales ratio up to 1.37. Meanwhile, forward looking indicators came in mixed. Unfilled orders dropped 0.2 percent in the month, but new orders rose 2.3 percent.

The nation’s manufacturing sales rose 0.6 percent in real terms in the third quarter, despite the slight fall in volumes in September. This sector is expected to stimulate the Canadian economic growth. The real GDP is expected to advance by about 3 percent in the September quarter, stated TD Economics.

Manufacturing sales is expected to stay healthy, going forward. Admittedly, the ongoing growth in the U.S. economy, along with the Canadian dollar lingering in the mid-70 U.S. cent range, should augur well for Canada’s manufactured goods in the rest of 2016 and into 2017.

Even though these developments would underpin the rotation of growth towards non-energy exports, the Bank of Canada is not expected to move off the sidelines anytime soon, especially given the new layer of uncertainty presented by the U.S. elections outcome, added TD Economics.

USD/CAD was trading at 1.3428 at around 05.06 GMT. Meanwhile, at 5.00 GMT the FxWirePro's Hourly Canadian Dollar Strength Index stood highly bullish at 131.652, while Hourly USD Strength Index stood neutral at 38.8922. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex