Canada’s manufacturing sales recover slightly in June

Manufacturing sales in Canada rebounded slightly in June and came in slightly higher than consensus projection. Manufacturing shipment rose 0.8 percent, following a decline of 1 percent in May. Consensus expectation was for a growth of 0.7 percent. In terms of volume, sales grew 0.5 percent.

Industry wise, manufacturing sales in volume terms, gained in 15 out of 21 major industries. Durable goods sales rose a solid 1.6 percent, countering flat non-durables sales of -0.1 percent. Machinery sales led the growth pack. It rose 5.8 percent after falling in the earlier five months. Transportation equipment sales grew 1.4, with the motor vehicle sector rebounding following supply disturbance in the earlier month.

Within non-durables, food production manufacturing drove the sales lower. It declined 1.2 percent. Petroleum and coal manufacturing dropped again in June by 0.4 percent, indicating to the lingering impacts of May’s wildfires, especially as the crude oil price and bitumen price rose on the month.

The manufacturing data for the month of June shows a welcome bright spot after quite a dismal run. June’s data might be quite late to make a sound impact on the second quarter economic growth, but it points to a strong rebound in output thereafter as temporary factors wane, said TD Economics in a research report.

Admittedly, disturbance to the oil and gas sector have not diminished totally, with additional boost to output likely as the sector continues to rebound in the months ahead. Furthermore, order books of manufacturers indicate towards a stronger second half of 2016. Additional supporting output would be larger demand from the US, where a subdued first half of 2016 is likely to provide path to more supportive growth, added TD Economics. The expected second quarter contraction is therefore anticipated to be a blip.

“Many of the temporary setbacks that dragged Q2 lower have already reversed, setting the stage for relatively healthy growth and a resumption of the economic rotation process over the latter half of this year,” noted TD Economics.

Region wise, Ontario led the growth in manufacturing sales in June by recording a growth of 1.4 percent. It gained from the recovery of motor vehicle and parts manufacturing. Also, sales rose in Saskatchewan, Alberta and Quebec by 4.3 percent, 1.8 percent and 0.2 percent respectively.