- Canadian manufacturing sales tumbled by 28.5% (m/m) in April. This was the largest single-month drop on record, and follows a sizeable 9.8% decline in March.
- Controlling for price effects, the picture was still stark, with manufacturing shipment volumes down 26%.
- Sales were down in all 21 major industries. The sharp decline in the headline figure was largely driven by transportation equipment (-76.4%, with motor vehicle sales collapsing 97.5%) and petroleum and coal products (-46.4%) sales. This was largely expected given the widespread shutdowns in auto plants and reduced or halted operations at some refineries.
- Unprecedented declines were widespread across all sectors, including food manufacturing, which saw a 12.8% drop in April. Statistics Canada reported that this occurred amid shutdowns in meat processing plants and reduced demand from the restaurant and accommodation industries.
- Inventories fell by 0.6%, but lower sales resulting in another spike in the inventory-sales ratio to 2.41 (from 1.74 in March). Forward-looking indicators were negative, with unfilled orders down 1.2% and new orders down 31.3%.
- Regionally, sales were down in all 10 provinces. Given the sectoral composition, Ontario (-37.1%) and Quebec (-26.7%) led the decline. Consistent with other indicators, smaller provinces (excluding Newfoundland & Labrador, which saw a 47.3% decline) were less impacted.
Key Implications
- April’s hit was significant but expected, especially given the previously announced shutdowns in the auto sector. The good news is that the worst is likely in the rear-view mirror. Assembly plants have since reopened, and provincial economies have gradually relaxed restrictions on manufacturing activity and most other sectors since May.
- That said, the path to recovery in the sector will be long and mired with uncertainty. May’s Markit PMI for Canada showed an easing in the pace of contraction, but sentiment still remained well into contractionary territory. The weak and uncertain global backdrop will continue to weigh on the sector’s prospects well into 2021.
