Canadian manufacturing sales start the year on a soft note

Canadian manufacturing sales fell by 1.7%, entirely wiping out Dec's gain. Sales have now declined in three of the last four months.  In real terms, manufacturing shipments were down by 1.0%.

The Jan drop in manufacturing sales was driven largely by a 12% slump in petroleum and coal product sales, which decreased for a seventh straight month and is sitting at its lowest level seen since May 2009. 

TD Economics notes in a report on Tuesday:

• The sharp drop in oil prices is being felt in the manufacturing sector, with lower sales of petroleum products weighing down the headline number.  Despite the slight uptick in oil prices in Feb, a reversal in March, and an expected further drop in prices in the second quarter is likely to remain a headwind for the industry in the coming months.
  
  
• That said, there are some positive offsets.  Demand for Canadian-made goods should pick up thanks to a robust US economy and a weak Canadian dollar - which likely has further room to fall.  Moreover, interest rates remain extremely accommodative, which should be supportive for manufacturers who need to increase capacity to meet demand.
  
  
• Overall, while the year has gotten off to a soft start, we expect the manufacturing sector as a whole to contribute favourably to growth this year, providing some offset to the impact of low oil prices.