Canadian manufacturing sales growth accelerates in May, manufacturing outlook remains uncertain

Canada’s manufacturing sales growth accelerated in May. On a sequential basis, manufacturing sales rose 1.6 percent after falling 0.4 percent in April. After accounting for price changes, the picture was encouraging, with volumes rising 1.7 percent.

The rise was recorded in 12 industries out of 21 and was led by the durable goods category, which rose 3 percent. Transportation equipment shipments rose 8.1 percent, driven mainly by a recovery in motor vehicle sales and motor vehicle parts as plans resumed production after atypical shutdowns in April. Sales of fabricated metal products and machinery were also sound.

Non-durable goods came in flat on the month at 0.1 percent. Increased sales of petroleum and coal products and chemicals were countered by lower food product sales.

Region wise, manufacturing sales rose in 6 out of 10 provinces. Ontario, Alberta and Quebec drove most of the headline rise, rising 2.7 percent, 2.2 percent and 0.7 percent, respectively. Meanwhile lower sales in Saskatchewan and British Columbia provided some offset.

Inventories rose for the sixth straight month, but the inventory-to-sales ratio dropped to 1.51. Forward looking indicators came in positive, with new orders rising 2.9 percent.

Today’s release indicates towards a rebounding domestic picture and a sound recovery in the second quarter, said TD Economics in a research report.

“Looking ahead, the outlook for the manufacturing and trade sectors remains uncertain due to ongoing trade tensions and moderating growth in China and elsewhere. The Bank of Canada's relatively conservative 1.5% forecast for growth in Q3 sets the bar low, providing some cushion to any downside surprises”, added TD Economics.

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