Canadian manufacturing sales fall sharply in April

Canada’s manufacturing sales dropped sharply by 28.5 percent on a sequential basis in April. This is the largest single-month fall on record, following a 9.8 percent fall in March. Controlling for price effects, the picture was still stark, with manufacturing shipment volumes falling 26 percent, noted TD Economics in a research report.

Sales fell in all 21 major industries. The sharp fall in the headline figure was mainly due to transportation equipment and petroleum and coal products sales, which saw a fall of 76.4 percent and 46.4 percent, respectively. This was greatly anticipated given the broad based shutdowns in auto plants and reduced or halted operations at some refineries, said TD Economics.

Unprecedented falls were broad based throughout all sectors, including food manufacturing, which recorded a fall of 12.8 percent in April. According to Statistics Canada, this occurred in the midst of shutdowns in meat processing plants and reduced demand from the restaurant and accommodation industries.

Inventories dropped 0.6 percent, but lower sales resulting in another spike in the inventory-sales ratio to 2.41. Forward-looking indicators came in negative, with unfilled orders falling 1.2 percent and new orders falling 31.3 percent.

Region wise, sales dropped in all 10 provinces. Ontario and Quebec led the decline with a fall of 37.1 percent and 26.7 percent, respectively. In all with other indicators, smaller provinces were less impacted, excluding Newfoundland & Labrador.

“The good news is that the worst is likely in the rear-view mirror. Assembly plants have since reopened, and provincial economies have gradually relaxed restrictions on manufacturing activity and most other sectors since May. That said, the path to recovery in the sector will be long and mired with uncertainty. May's Markit PMI for Canada showed an easing in the pace of contraction, but sentiment still remained well into contractionary territory. The weak and uncertain global backdrop will continue to weigh on the sector's prospects well into 2021”, added TD Economics.