- Canada’s manufacturing sales increased 3.5% (m/m) in March, matching Statistics Canada’s flash estimate for the month. The picture was still encouraging after accounting for price effects, with manufacturing shipment volumes up 2.3% on the month.
- The increase in nominal sales was largely driven by higher motor vehicle sales (up 10.5% on the month). Still, the increase in output was relatively broad-based, spanning 17 of the 21 industries. The petroleum and coal products (+6.2%), wood products (+4.6%), primary metals (+4.1%), and food manufacturing (+2.7%) industries also contributed significantly to the monthly increase.
- Forward looking indicators were mixed, with new orders up 5.2% and unfilled orders flat. Inventories declined 0.4% on the month, brining the inventory-to-sales ratio down to 1.53 (from 1.59 in February).
Key Implications
- March’s rebound in manufacturing sales is encouraging. However, stripping away the monthly noise suggests that Canada’s manufacturing sales volumes have been moving sideways for the past two quarters. Short-term indicators are painting a mixed picture for the industry. For instance, Markit’s manufacturing PMI survey pointed to further expansion in April. However, supply chain disruptions are featuring prominently in survey responses, with today’s report citing component shortages and shipment delay concerns. Indeed, the impact of global shortages in semiconductors on the motor vehicle industry are expected to intensify further in April. At the same time, April’s Labour Force Survey release revealed a nearly flat print for employment and a decline in hours worked in the industry in April.
- While much uncertainty remains, the outlook for the sector appears more promising in the medium term. Should these supply chain issues resolve, the reopening of the Canadian economy and continued strength in the U.S. economy will provide a boost to demand.
