- Canadian manufacturing sales fell 1.2% (m/m) in June, following a 1.6% gain in May (no revisions were made to the headline print). This was slightly better than consensus estimates for a 1.8% drop. After accounting for price changes, volumes were down just 0.2%.
- The drop was relatively broad-based (16 of the 21 industries) and was driven by the non-durable goods category, which fell 3.3% in June. Petroleum and coal products (-3.8%) contributed the most to the decline, with the drop fully attributed to lower prices. Shipments of food product (-2.5%), paper (-5.9%), plastics (-3.7%) and chemicals (-2.9%) also shrank notably.
- On the flip side, durable goods were up 0.7% on the month. Sales of primary metals (11.7%) surged in June, but were partially offset by sharp declines in machinery (-5.6%) and wood product (-2.7%) shipments.
- Regionally, shipments were down in 8 of the 10 provinces. Alberta (-6.5%), Newfoundland & Labrador (-17.5%), and Nova Scotia (-12.1%) contributed the most to the drop. Sales were also weak in Saskatchewan (-6%) and Manitoba (-5.8%). Providing some offset were higher sales in Quebec (+1%).
- Inventories fell 1.5%, following six consecutive months of increases, leaving the inventory-to-sales ratio at 1.51 (from 1.52 in May). Forward looking indicators were disappointing, with new orders down 4.2% and unfilled orders down 1.2%.
Key Implications
- With recent surges in manufacturing shipments largely driven by one-off transactions (specifically in the transportation equipment category), June’s pullback was to be expected. For the second quarter as a whole, manufacturing sales were up a still-healthy 1.7% (1.8% in volume terms). This leaves our Q2 GDP tracking unchanged at 3% but suggests soft momentum heading into the third quarter.
- Looking ahead, the outlook for manufacturing remains highly susceptible to the ongoing moderation in global growth and elevated trade tensions.
