Highlights:
- Manufacturing sales edged down 0.3% in December following an upwardly revised 3.8% jump in the previous month. Sales volumes were down just 0.1% in December.
- The pullback was in nondurable goods production as petroleum & coal and food manufacturing both reversed some of their earlier gains. Durable goods sales rose in the month to provide some offset.
- Overall, sales were down in 11 of 21 manufacturing sectors in December.
Our Take:
Manufacturing sales fell slightly in December after jumping higher in the previous month when a number of transitory shutdowns ended. Higher manufacturing output was a factor in November’s above-trend 0.4% GDP growth. Given today’s numbers we don’t expect that gain will be repeated in December. Even so, we think the data continues to track annualized GDP growth of 1.9% in Q4/17, slightly softer than the Bank of Canada’s 2.5% projection but still an ‘above-potential’ rate.
December’s data closes the book on a solid year for Canadian manufacturers. Sales volumes rose 3.3% in 2017, marking the sector’s best gain since 2010’s post-recession rebound. 16 of 21 subsectors posted higher volumes last year, led by a double digit gain in machinery manufacturing. That sector, and a number of others, should continue to be supported in 2018 by rising business investment in Canada and the US. However, Nafta renegotiations remain a major risk to the manufacturing industry as a whole and competitiveness challenges are only being exacerbated by US corporate tax cuts. With manufacturing capacity utilization running at its highest rate since 2000, the industry will need to see some investment in order to maintain the positive growth trend that emerged last year.
