Highlights:
- Manufacturing sales jumped another 1.1% in June as shutdowns at petroleum refineries ended.
- Volume sales increased 0.7% but declined about 1.2% excluding the petroleum component.
- Looking through monthly volatility, overall sale volumes were still up 2.8% from a year ago reflecting relatively broadly-based gains. consecutive month.
- The details of the monthly sales data suggest that manufacturing output (i.e. the manufacturing component of monthly GDP) likely increased another 0.2% in June.
Our Take:
As usual, details were more mixed than the 1.1% nominal headline increase — 0.7% excluding price impacts — alone would imply. A 15.9% surge in petroleum & coal refinery sales alone more than accounted for the overall nominal gain in June as temporary maintenance shutdowns that weighed on output in the last two months eased. Sales declined 0.4% excluding petroleum products. Auto sales bounced back after earlier production disruptions but chemical sales declined as pesticide and fertilizer product sales retraced earlier gains. The monthly numbers are often volatile, though. Looking through monthly wiggles, overall sale volumes were still up 2.8% from a year ago suggesting the manufacturing sector in Canada is still holding up relatively well in the face of continued trade uncertainty. The volume of unfilled orders increased another 0.4% month-over-month in June and is up 8.4% year-over-year meaning there is still room for sales to increase further in the near-term.
Concerns about competitiveness and the threat of additional trade disruptions from the U.S. remain given the heavy integration of the manufacturing sector across the Canada-U.S. border. Of course, that reliance cuts both ways, and Canadian manufacturers are likely, at least for now, also benefitting from a much improved U.S. manufacturing sector that posted its strongest year-over-year output growth in more than 6 years in July. Coupled with other better recent economic data — and absent an unexpected shock — the economic backdrop still looks strong enough to warrant further gradual interest rate hikes from the Bank of Canada.
