Canada's March manufacturing sales rebounded from their Feb decline, rising 2.9% on the month. The gain was not broad based, with slightly less than half of industries reporting an increase in sales. The transportation sector led the way in March, as sales in the volatile aerospace industry jumped 42.3% after a 29.4% drop the prior month.
Data closes out what was a soft first quarter for Canada's manufacturing sector. Real activity in the industry contracted for the second straight quarter. Canada's economy looks to have stalled in Q1, as contraction in the energy sector and a soft patch in U.S. growth dealt a one-two punch to Canada's output. While the 2.9% increase in manufacturing sales volumes in March points to better momentum heading into Q2, economic growth overall is still expected to be sluggish.
"With a first quarter slump largely behind us, today's release is unlikely to add too much to the Bank of Canada's thinking on the future path of interest rates. The manufacturing sector is forecast to pick up steam in the second half of the year on stronger demand from the United States. Therefore, the rise in global bond yields and the Canadian dollar in recent weeks is likely of more interest to the Bank. That combination tightens financial conditions in Canada, and the Bank will be watching closely to ensure it does not inhibit the expected export-led rebound in economic growth in the second half of the year." notes TD Economics
