- Manufacturing sales rose 7% in July, 6.1% excluding price changes
- Auto sector bounce-back boosted headline, but ex-auto sales also up 3%
- Manufacturing sentiment improved further in August but sales growth still to slow
The 7% manufacturing sales gain in July was a bit lower than Statistics Canada’s earlier-released 8.7% preliminary estimate, although following an upward revision to June to show a whopping 23% increase. The early bounce-back in sales in the sector has been sizable – gains May through July retraced about 85% of the decline over March and April – but but the sales pace was still running almost 7% below year-ago levels. That still lags behind the rapid bounce-back in retail sales, which were already back above year-ago levels in June, and surging housing markets over the summer.
Part of the bounce-back in July manufacturing sales was tied to seasonal adjustment quirks – as the timing of typical factory shutdowns in the summer in the auto sector was disrupted by earlier shutdowns in the spring during COVID-19 containment measures. Excluding motor vehicle and parts, sales were still up 3% in July, but also still down almost 9% from a year ago.
The manufacturing sector likely continued to improve in August. An improvement in the Canadian manufacturing PMI suggested that businesses were feeling better about the outlook. Still, the pace of improvement is clearly slowing. Manufacturing hours worked increased another 2% in August, but that was the smallest increase in four months and left the measure still running 5% below year-ago levels. The key go-forward risk remains virus spread and the potential for a revival of containment measures both in Canada and abroad. We continue to expect the manufacturing sector (and the economy more broadly) will be running still significantly below long-run capacity levels as long as the virus continues to disrupt activity.
