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Canadian manufacturing sales rise sharply in June

Canada’s manufacturing sales rose 20.7 percent sequentially in June, coming in above the flash estimate of a rise of 16.8 percent. This follows a rise of 11.6 percent in May, but still leaves manufacturing sales levels 13.2 percent below their pre-COVID levels. Controlling for price effects, manufacturing shipment volumes rose strongly by 18.4 percent.

The rise in sales was seen in all 21 industries. The transportation equipment saw a rise of 144.3 percent, while the petroleum and coal product industries saw a rise of 31.5 percent. A resumption in production at motor plans drove a 281.6 percent rise in motor vehicle sale and a 190.3 percent rise in motor vehicle parts sales.

A ramp-up of production at refineries, along with higher energy prices, drove the rise in petroleum product sales. Lesser rises were seen in most other industries. Inventories fell 0.3 percent, bringing the inventory-sales ratio down to a still-elevated 1.79. Forward-looking indicators were decent overall, with new orders rising 23.6 percent but unfilled orders down 1.6 percent.

Region wise, sales rose in 8 of the 10 provinces. The recovery was mainly driven by Ontario and Quebec. Manitoba and Prince Edward Island were the only two provinces recording a fall in sales.

“Looking ahead, we continue to receive positive signals that the recovery in the manufacturing sector continues. These signals include further increases in manufacturing employment (+1.8 percent) and hours worked (+3.6 percent) in July. Importantly, sentiment in the sector has also markedly improved, as communicated by a return to expansionary territory in Canada's Markit manufacturing PMI in July (to an index level of 52.9) and strong ISM manufacturing sentiment readings in the U.S. The key headwind going forward is still-elevated uncertainty around the virus and trade relations”, said TD Economics in a research report.

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