Canadian manufacturing sales rise strongly in June

Canada’s manufacturing sales came in strong again in the month of June. On a sequential basis, Canada’s manufacturing sales rose 1.1 percent after May’s upwardly revised 1.5 percent rise. This was slightly above market projections of a 1 percent rise. Volumes, after accounting for price changes rose 0.7 percent.

The headline print was driven by nondurable goods, which rose 1.9 percent. Within nondurable goods, petroleum and coal products rose sharply by 15.9 percent after the impacts of temporary shutdowns in April dissipated and refineries recorded sharp rises in capacity utilization.

Meanwhile, durable goods rose 0.5 percent sequentially, but fell 0.25 percent in real terms. Within durable goods, autos saw a recovery, with motor vehicle sales increasing 2.8 percent. However, performance in the overall transportation equipment sector was pulled down by falls in aerospace products and parts that dropped 5.3 percent. Fabricated metals also showed healthy increases of 3 percent on the month. Primary metals manufacturing dropped 0.3 percent in June, possibly indicating early signs of steel and aluminum tariffs impacting sales in the category.

Region wise, Quebec and Alberta led manufacturing sales growth, with the provinces’ sales rising 3.8 percent and 3.7 percent in June, respectively. Manufacturing sales also rebounded in three other provinces, including Ontario, British Columbia and New Brunswick. Saskatchewan recorded the most disappointing performance, with sales dropping 11.1 percent because of declines in chemical products and pesticide sales. Sales dropped in Nova Scotia, Prince Edward Island, Manitoba, and Newfoundland and Labrador.

Inventories continued with their upward trend, rising 0.5 percent, but sales pushed the inventory to sales ratio lower to 1.41. Forward looking indicators came in mixed, with new orders falling 1.8 percent and unfilled orders rising 1.7 percent.

The report released today closes off a strong second quarter on a solid note. Manufacturing growth, while led by rebounding petroleum and coal products, seems healthy in other sectors as well, including fabricated metals and autos. This was further stimulated modestly by an upward revision to the earlier month’s performance. Today’s releases adds further credence to the earlier upwardly revised second quarter tracking and strengthens expectations for an October rate hike, noted TD Economics in a research report.

“Looking ahead, this lends a solid handoff to the third quarter. It is important to note, however, that transitory factors in this month's performance (especially the surge in petroleum and coal products sales), will not be repeated. Moreover, mixed signs in forward looking indicators may indicate some deceleration in momentum heading into the upcoming quarter”, added TD Economics.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was bearish at -88.6898, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 19.17719.177. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex