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Canada’s manufacturing sales fall sequentially in October on drop in motor vehicle industry

The Canadian manufacturing sales dropped in the month of October after rising for two months. Manufacturing sales dropped 0.4 percent sequentially, as compared with consensus expectations of a rise of 0.2 percent. Meanwhile, sales volume in real terms dropped 1.5 percent sequentially.

Most of the fall was driven by the motor vehicle industry (-6.7 percent), which witnessed 7.6 percent drop in volumes due to assembly plant shutdowns in the month. Many industries countered the decline, including petroleum and coal products, fabricated metal products, computer electronic products and wood products.

Region wise, sales dropped in six provinces. Ontario saw a decline of 2.2 percent, mainly due to the auto industry. Meanwhile, sales in Alberta and B.C. rose during the month. The inventory-to-sales ratio was up to 1.40 in October, owing to a 1.6 percent rise in inventories. Forward looking indicators were encouraging, with unfilled orders rising 2.4 percent and new orders growing 5.3 percent.

Manufacturing volumes were held back in October due to disruptions in the auto sector, which have been resolved since. As such, auto manufacturing is expected to bounce back strongly in the rest of 2018, aiding in raising the overall output in the sector.

Excluding the auto sector, forward looking indicators point towards a better performance in the months ahead. Furthermore, with the U.S. economic activity in the U.S. likely to rebound, demand for Canadian made goods should follow suit, underpinning factory production in Canada.

Manufacturing is expected to add to another solid performance from the Canadian economy in the fourth quarter and in the next year, noted TD Economics in a research report.

At 15:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at -47.781, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 40.5098. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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