Canada’s manufacturing sales fell 3% (month/month) in September – a slightly smaller decline than Statistics Canada’s flash estimate (-3.2%). The picture was more disappointing after accounting for price effects, with manufacturing shipment volumes down 4.2% on the month.
The decline in nominal sales spanned 12 of the 21 industries. However, it was once again, predominantly an auto sector story. Motor vehicle sales fell a whopping 35.6%. Sales were also weak in the primary metals (-6.3%), plastics and rubber (-3.6%), and chemicals (-1.8%) industries. Strong sales in the petroleum and coal products industry (+3%) provided some offset.
Inventories rose 1.3% on the month, lifting the inventory-to-sales ratio to 1.67 (from 1.60 in August). Forward looking indicators were mixed, with new orders down 3% and unfilled orders up 0.6%.
Key Implications
The ebb and flow of Canada’s manufacturing sales continues to be dictated by lingering supply disruptions in the auto sector. September’s sales plunge was particularly pronounced, leaving sales levels in the motor vehicles industry 60% below pre-pandemic levels and at their lowest since May of last year. The broad-based weakness across other industries in September’s manufacturing report rubbed salt to the wound.
The near-term outlook for the manufacturing sector remains clouded. On the one hand, sentiment remains notably strong in Canada and the U.S., as evidenced by recent PMI releases. This optimism should be further corroborated by continued resilience in labour markets and consumer demand. Still, supply constraints are leaving their mark on the industry. These disruptions can take time to dissipate, and survey responses have suggested that they may last well into 2022.
