Contrary to market expectations for a decline (-0.5% m/m), Canadian manufacturing sales climbed 0.5% on a month-on-month basis. Volumes were up a touch more, +0.7% m/m, and prices fell back a bit.
Petroleum and coal product sales drove gains in the month (+10.3%), largely a reflection of strong volume growth, and marks the third consecutive monthly advance. Machinery (+1.9% m/m) and paper industries (+1.0% m/m) also recorded gains, with volumes outpacing nominal performance.
Transportation equipment industry sales fell 0.7% m/m, driven by declines in the motor vehicle (-5.9%) and motor vehicle parts (-2.5%) industries; the decline in volumes was a little less pronounced.
Quebec recorded a gain of 1.7% in September, as petroleum and coal manufacturing and the aerospace industry helped propel sales to their highest level on record ($13.3 billion). Performance across the remaining provinces was generally positive with the exception of Nova Scotia (-3.9%), Ontario (-0.9%), and Alberta (-0.9%).
Inventory levels declined for the fourth consecutive month, helping to push the inventory-to-sales ratio down a bit to 1.36 (August: 1.38). Forward looking indicators declined in September, with unfilled orders falling 1.1% and new orders declining 1.7%.
Key Implications
Both headline and volume prints for manufacturing sales were surprisingly strong despite concerns that labour disruptions at an assembly plant in Ontario could negatively impact automotive sales. This report follows on the heels of a hot August report that featured a rebound in automotive production.
Overall, today’s report remains consistent with our view that after four consecutive quarters of growth well in excess of trend the Canadian economy has slowed to a more sustainable pace of around 2.0% in the third quarter.
