- Canada’s manufacturing sales increased 3.1% (m/m) in January. This was above Statistics Canada’s flash estimate for a 2.5% increase. The release leaves the level of manufacturing sales 0.8% above its pre-pandemic (February 2020) levels.
- Price effects played a role, but the picture was still decent after controlling for prices, with manufacturing shipment volumes up 1.1% on the month.
- Gains were relatively broad-based, with 16 of the 21 industries recording an increase in shipments in January. Durable goods led the way, with sales of wood products (+9.1%), computer and electronic products (+22.4%), primary metals (+6%), and nonmetallic mineral products (+16.8%) all contributing significantly to the headline increase. Sales of food products (+2%), chemicals (+3.3%), and plastics and rubber products (6.9%) were also strong. Lower shipments of transportation equipment (-2.9%) products provided some offset. Statistics Canada cited the shortage of semiconductor chips as a driver of lower auto production.
- Regionally, sales were up in 8 of the 10 provinces. Ontario (+3%), Quebec (+2.8%), British Columbia (+5.3%), and Alberta (+2.9%) all contributing to the headline increase. Only Newfoundland and Labrador (-7.4%) and PEI (-5.7%) saw declines on the month.
- Inventories were up 1.9%, but higher sales brought the inventory-to-sales ratio to 1.57 (from 1.59 in December). Forward-looking indicators were encouraging, with new orders up 6.1% and unfilled orders up 2.3%.
Key Implications
- After three consecutive months of declines in manufacturing shipment volumes, the sector is starting the new year on a brighter note. January’s manufacturing sales print joins a list of other indicators pointing to a solid performance for the Canadian economy in early 2021. While we’re not out of the woods yet, the ramp up in vaccinations and the gradual removal of restrictions in Canada’s largest provinces suggest that decent performances are in the cards going forward.
- External drivers have also joined to lift the outlook for manufacturing sales. A commodity bull market and unrelenting demand for building and wood products have been supportive for sales and exports. At the same time, a sizeable stimulus package and the expectation of meaningful outperformance for the U.S. economy (Canada’s largest trading partner) bodes well for Canada’s manufacturing exports this year.
