Canadian manufacturing sales declined 1.4% in November, following the prior month’s 0.1% drop (no revisions were made to the headline number). This came against expectations for a 1% decline. After accounting for price changes, the print was still disappointing, with volumes down 0.9%.
Durable good sales were up 0.5%, driven by transportation equipment sales, which saw a 1.3% increase on the back of a surge in the volatile railroad rolling stock (+28.6%) and aerospace products and parts (+7.7%) categories. Fabricated metal products also posed a decent 1.5% increase.
Non-durable goods, which fell 3.4%, were responsible for the decline in the headline number. This was driven primarily by a drop in petroleum and coal product sales (-13.8%). As expected, lower global oil prices were responsible for part of the this decline, but refinery maintenance and lower production also resulted in a lower volumes print (-8.4%). Only partially offsetting this decline in non-durable good shipments was an increase in food product sales (+1.5%).
Regionally, manufacturing sales were down in six provinces. Ontario (-1.1%), Alberta (-6.8%), Newfoundland & Labrador (-25.9%), and New Brunswick (-9%) led the overall decline. Quebec, Saskatchewan and Manitoba saw decent increases, up 0.9%, 3.3%, and 5.2%, respectively.
Inventories declined 0.6%, the first monthly decline in more than a year. The inventory-to-sales ratio ticked up to 1.47. Forward looking indicators were mostly negative, with new orders down 2.9% and unfilled orders up a modest 0.3%.
Key Implications
This was a disappointing, albeit expected decline, which was made worse by the volumes print. The one comforting bit of news is that after stripping out the impact of petroleum and coal products, manufacturing sales were up 0.2%. Nevertheless, the release confirms the moderating growth narrative, one that has been reinforced by other disappointing releases, including the recent international trade data and today’s wholesale trade data.
Sub-par manufacturing performance is still expected in the near-term, as Alberta’s production curtailment plan starts to reflect in manufacturing sales volumes.
It is important, however, to note that these are temporary shocks. As these shocks fade, manufacturing sales should receive support from strong economic performance south of the border, a weaker loonie, and expectations of increases in investment spending in the face of elevated capacity constraints.
