Canadian manufacturing sales fall in August

Canada’s manufacturing sales dropped in August, after July’s upwardly revised data. Sales fell 0.4 percent, following July’s 1.2 percent print. Today’s data is a bit better than expectations of a fall of 0.6 percent. After accounting for price changes, volumes also dropped modestly by 0.3 percent.

Durable goods mainly drove the fall. Durable goods dropped 1.2 percent. This was mainly due to a decline in motor vehicle sales and railroad rolling stock. Aerospace product sales gave some offset, increasing 13.5 percent and resulting in a less-severe 2.4 percent contraction in the overall transportation equipment sector. Primary metals also dropped for the third straight month, down 2.9 percent. On the contrary, machinery sales rose 2 percent.

Non-durable goods performed better, rising 0.5 percent, owing to higher chemicals and plastics and rubber products sales. Region wise, declines were main driven by Ontario, as expected given the sharp decline in auto sales. Alberta and Nova Scotia also recorded declines, whereas the remaining seven provinces recorded manufacturing sales rise on the month.

Inventories rose 1.1 percent, continuing their upward trend again, whereas the inventory-to-sales ratio also rose to 1.43. Forward looking indicators were generally positive, with new orders rising 1.1 percent and unfilled orders up 0.8 percent.

“We continue to expect moderate growth going forward, but this week's Business Outlook release adds some optimism to Canada's manufacturing (and general business) outlook, with signs of increasing investment on the back of rising domestic and U.S. demand and growing capacity constraints”, stated TD Economics in a research report.

Solid growth indicators in the second quarter have given enough conviction thus far for a Bank of Canada rate hike next Wednesday.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at 2.71772, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 7.24127. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex