- Canadian manufacturing sales advanced 2.1% (m/m) in March, following a 0.2% drop in February. The release came in higher than market expectations for a 1.5% increase. After accounting for price changes, the print was still encouraging, with volumes up 1.6%.
- The composition of the gains was mixed, with 12 out of the 21 industries recording a gain. Durable goods led the way, up 2.9% on the month. This was driven largely by strong transportation equipment sales (+4.5%) on the back of a 7.1% increase in the volatile aerospace products and parts shipments category (which fell 12.2% in January), and more importantly, a rebound in motor vehicle sales (+6.5%). Statistics Canada attributes the latter to a drawing down of inventories in several plants. Shipments of primary metals were also up an impressive 5.3%.
- Non-durable goods also advanced in March, up 1.3%. This was driven largely by petroleum and coal products (+8.2%).
- Regionally, manufacturing sales increased in 8 out of the 10 provinces. Ontario (+1.7%), Alberta (+3.9%), Quebec (+1.7%), and British Columbia (+3.8%) led the gains. The Atlantic provinces saw impressive gains, with sales in Newfoundland & Labrador up 14.5%, and sales in New Brunswick up 4.9%. Declines in Saskatchewan (-2.1%) and Manitoba (-1.9%) provided some offset.
- Inventories climbed 1% (the fourth consecutive monthly increase), but improved shipments reduced the inventory-to-sales ratio to 1.50 (from 1.52). Forward looking indicators were generally positive, with new orders up 1.5%, although unfilled orders were flat (up 0.1%).
Key Implications
- Like last week’s international trade data, March’s manufacturing sales print is encouraging, and provides some decent momentum heading into the second quarter. For the first quarter as a whole, however, manufacturing sales volumes were up only a modest 0.3%, further confirmation of the soft patch that started the year. The release leaves our GDP tracking effectively unchanged at around 0.5% for Q1.
- The outlook for manufacturing sales remains uncertain. A low Canadian dollar and strong performance south of the border should be supportive of the sector, but recent tariff developments between the U.S. and China, generally heightened global trade uncertainty, and still high inventory levels all serve as moderating factors.
