Canada’s manufacturing sales dropped in October. On a sequential basis, the manufacturing sales fell 0.7 percent after falling 0.2 percent in the prior month. Consensus expectations were for a flat print. Excluding price impacts, the figure was still disappointing, with manufacturing volumes falling 0.4 percent.
Out of 21 industries, sales dropped in 11. The disappointing figure was a durable goods story, which recorded a fall of 2.4 percent sequentially due to a large fall in transportation equipment sales. This was driven by lower motor vehicle and motor vehicle parts shipments, with sales of both impacted by lower activity at some plants. Marked softness was also recorded in fabricated metal sales.
On the contrary, non-durable goods’ shipments rose 1.3 percent. This was driven by a recovery in petroleum product sales as refineries ramped up production after maintenance shutdowns in September. Food sales also indicated some strength. Lower sales of plastics and rubber products provided some offset.
Region wise, manufacturing sales only dropped in 3 out of 10 provinces. Ontario, British Columbia, and to a lesser extent, Quebec led the overall fall. New Brunswick recorded a 26.5 percent spike in sales due to higher non-durable good sales. Inventories dropped 0.4 percent, but soft sales left inventory-to-sales ratio at a still-elevated 1.54. New orders dropped 4.9 percent and unfilled orders also fell 1.5 percent.
“We have noted before that Canadian manufacturing shipments and exports face a cloudy outlook given the global backdrop. The recent de-escalation of U.S.-China trade tensions should help support an uptick in sentiment, but manufacturing PMIs globally are still in contractionary territory. Uncertainty will continue to cloud the outlook until further details and assurances are provided”, said TD Economics in a research report.
