Highlights:
- Manufacturing sales fell 1.8% in June.
- The drop was broadly-based with declines in 15 of 21 industries although prices accounted for more than half of a large 7.1% drop in petroleum & coal sales.
- Sale volumes fell 1.0%. That did not fully retrace the 1.2% jump in May. The measure was still up solidly from a year ago.
- Machinery sale volumes averaged 20% above year-ago levels in Q2
- Overall Q2 GDP growth still looks broadly on track to match Q1’s 3.7% increase.
Our Take:
Manufacturing sales took a breather in June but the 1% drop in sale volumes still did not fully retrace the 1.2% increase in May. The often-volatile measure is still up almost 4% from a year ago. That’s down from almost 5% in May but is still the second-highest year-over-year reading since December of 2014. Sales of machinery have led the way, averaging 20% above year-ago levels in volume terms in the second quarter. Part of that probably reflects stronger activity in the U.S. industrial sector year-to-date but domestic Canadian business investment has also been showing encouraging signs of life. Concerns about the recently commenced NAFTA renegotiation – and any potential for resulting trade protectionism – does present some potential downside risks going forward. At this point, though, we expect today’s dip lower in sales likely is more of a downward blip on an improving trend than a fundamental slowing.
