Canada’s manufacturing sales saw a decline in October after recording a rise in the prior month. On a sequential basis, manufacturing sales dropped 0.1 percent, as compared with consensus expectations of a rise of 0.4 percent and last month’s rise of 0.2 percent. The picture is a bit more encouraging after accounting for price changes, with volumes rising 0.2 percent.
Durable good sales dropped 0.9 percent. Wood products and primary metals drove most of the overall headline decline, falling 7.5 percent and 3 percent, respectively. Aerospace products also dropped 7.9 percent. Sales of motor vehicles and parts countered the fall slightly by recording a rise of 0.9 percent and 1.7 percent, respectively. Machinery and equipment sales recovered 2.9 percent.
Non-durable goods recorded a rise of 0.7 percent, owing to food products and petroleum and coal products that rose 1.5 percent and 0.9 percent, respectively.
Region wise, manufacturing sales rose in 7 provinces, with the rise led by Ontario, Saskatchewan and Manitoba. Countering these were falls in Quebec, New Brunswick and British Columbia. Inventories rose 1 percent, continuing their upward trend, with the inventory-to-sales ratio at 1.46. Forward looking indicators came in positive, with new orders rising 2.4 percent and unfilled orders also rising 1.4 percent.
With volumes rising 0.2 percent, the details of the release are more encouraging than the headline implies, noted TD Economics in a research. Still, the modest rise affirms the easing growth narrative heading into the fourth quarter, one that has so far been echoed in other economic indicators, labor market aside.
The recovery in machinery sales after last month’s slump is a positive bit of news. International trade data have also affirmed a decent picture for machinery and equipment imports and demand. Along with signs of capacity restraints in the Bank of Canada’s Business Outlook Survey and elevated capacity utilization levels, this paints a cautiously positive picture of investment spending going forward, and aligns with the expectation of a shift from consumer spending to investment and exports as contributors to growth in 2019, stated TD Economics.
Decent growth and manufacturing activity in the U.S., along with elevated capacity constraints might give some support to manufacturing sales. However, headwinds are to be expected.
“Energy sector developments, including depressed oil prices, and both voluntary and mandatory production shut-ins in Alberta should weigh on both nominal and real sales in the next few quarters”, added TD Economics.
At 16:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bearish at -127.553, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -5.42529. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
