Canadian manufacturing sales beat expectations in December

OTTAWA – Canadian manufacturing sales ramped up after last year, Statistics Canada said Tuesday, but the hollowed out industry still remains below its pre-financial crisis peak.

Sales of products produced in factories increased 1.2 per cent to $51.6 billion in December, while sales figures for November were revised higher to at least one.2 percent from one percent. The bump in sales was reflected in a strong December trade report, which saw non-energy exports surge and Canada’s trade deficit unexpectedly shrink to $585 million from $1.6 billion in November.

Still, for the about a manufacturing revival in Canada, there is still quite a distance to go before the industry returns to its glory days.

“Activity has yet revisit January 2008 levels after eight years,” said Benjamin Reitzes, senior economist at BMO Capital Markets. “Even on the nominal basis, which advantages of a weaker Canadian dollar, sales were below year-ago levels in 10 of 11 months to December.”

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The hope now is the two positive months after 2015 will translate into momentum in 2016. Last month, the Bank of Canada said there have been signs that the non-energy segments from the economy were beginning to gain steam. Tuesday’s manufacturing report lends support to that particular statement.

The report showed that factory sale gains were seen in a number of sectors: motor vehicles, wood products, chemicals, ship and boat building and transportation equipment all registered notable increases. The fir.2 per cent rise in all manufactured goods also handily beat the expectations of economists surveyed by Bloomberg, who had forecast a 0.5 percent increase.



“Looking across categories reveals relatively broad-based gains – something that was mirrored by the export figures released earlier,” said Nick Exarhos, economist at CIBC Economics.

In constant dollar terms, sales for December were up 1.3 percent, meaning a greater amount of manufactured goods were sold during December than the headline number suggests.

Inventories for that month declined 1.6 per cent, with aerospace products and parts and petroleum and coal seeing the biggest drawdowns. The inventory-to-sales ratio fell from 1.44 in November to at least one.4 in December. The ratio represents time, in months, it would take firms to exhaust inventories if sales remain at current levels.

But while November and December registered strong gains, manufacturing sales actually fell its 2015 for that first annual decline because the global recession. Petroleum and coal products were the primary source of the decline, according to StatsCan, with the industry visiting a 28.6 percent stop by sales, due mainly to some 22.3 percent stop by the typical price of refined petroleum products. 

“Provinces heavily active in the gas and oil extraction sector taken into account the majority of the manufacturing decline in 2015,” said StatsCan in its release.

Sales of products manufactured in Alberta took the biggest hit, dropping 15.9 percent every year and a pair of.4 per cent month-over-month. Manitoba and Prince Edward Island were the only other two provinces to see sales fall in December.

Quebec, Ontario and New Brunswick reported the biggest gains, with automobile and parts sales being particularly strong in Ontario.

The hope now is that the momentum seen at the end of 2015 will carry in to the year as the loonie remains as weak and oil prices remain depressed. Even with the annual decline in 2015, StatsCan notes that whenever excluding petroleum and coal products, manufacturing sales actually increased every year by 2.6 per cent last year.

“Going forward, we still think that Canadian factories will begin reaping the advantages from the expansion of the U.S. economy and also the plunge from the Canadian dollar,” said Marc Pinsonneault, economist at National Bank of Canada.

jshmuel@nationalpost.com

Twitter.com/jshmuel