Highlights:
- Manufacturing sales bounced back 1.6% in August. That was much stronger than the 0.3% decline expected by markets largely reflecting an unexpected bounce-back in motor vehicle sales after a July drop.
- The auto sale gain entirely accounted for a 1.2% increase in overall sale volumes although machinery sales also posted an encouraging gain of 4.2.
Our Take:
Canadian manufacturing sales unexpectedly jumped 1.6% in August after declining sharply in each of the two prior months. Most of the upward surprise came from a rebound in the motor vehicle component where sales rebounded 12.9% after an almost 20% drop in July. The auto component is notoriously volatile over the traditional July-August ‘retooling’ period in the industry but earlier reports had suggested a risk another significant sales decline in August. The auto increase accounted for almost three-quarters of the total sales gain in nominal terms and all of a 1.2% increase excluding the impact of prices. This did mask, though, some encouraging elements outside of the auto sector, perhaps most notably a 4.2% jump in machinery sale volumes that more-than-retraced a 2.0% drop in July. Industrial equipment exports declined in August, so that increase would seem to have been driven by stronger domestic Canadian business investment.
The monthly GDP calculation uses a slightly different methodology for measuring motor vehicle production, so not all of the rebound in motor vehicle sales reported today will ultimately flow through to the motor vehicle component of GDP. Nonetheless, the data is broadly consistent with our view that GDP returned to a positive growth rate in August after a pause in July that followed 8 consecutive increases.
