Manufacturing Sales Analysis – February 2017

Sales flat in February after a record January

A surge in aerospace deliveries in February offset declines in the auto sector, helping to keep overall manufacturing activity essentially flat after a record-setting January. Overall sales dipped by 0.2 per cent in February to reach $53.6 billion. Even so, that $53.6 billion represents the second-highest (nominal-dollar) monthly sales level on record.

mfg sales Cda chart

In spite of the month-over-month decline, early returns on 2017 have been very positive for the manufacturing sector. Year-over-year sales have been trending up since the fall, and February's sales numbers were 6.8 per cent higher than they were 12 months earlier. Moreover, recent sales growth has been largely driven by volume gains rather than price effects.

strong year over year chart

Although sales activity remains solid, February did bring with it a few dark clouds in terms of the short-term outlook for future business. Specifically, new orders for Canadian manufactured goods (not including aerospace) tumbled by 6.3 per cent compared to January, erasing three consecutive months of growing business demand. Similarly, there was an increase in manufacturers' inventory stockpiles, as output in aerospace, primary and fabricated metals and refined petroleum went unsold. Overall inventory levels rose 1.6 per cent in February, led by a 9.0 per cent increase in the aerospace sector.

mfg new orders chart

In spite of that increase in inventories, February was still an excellent month for aerospace production in Canada. After trending steadily downward since last May, sales activity jumped by 27 per cent compared to January to reach its highest level ($1.82 billion) since December 2015. In fact, were it not for the surge in aerospace sales, overall manufacturing activity across Canada would have fallen by 1.0 per cent in February instead of 0.2 per cent.

mfg sales by industry chart

Aerospace may have been the primary growth driver in February, but it was not the only industry to see gains. Strengthening demand in the energy sector and stabilizing commodity prices are helping spark a recovery in primary and fabricated metals manufacturing, as well as machinery production. All three industries recorded solid gains in February, continuing a trend that began early last summer.

recovery underway in metals chart

Those gains were offset by losses in two key industries: automobile and parts production, and petroleum refining. In the case of the auto sector, sales fell 4.5 per cent in February as production volumes tumbled after a temporary spike in December and January. Lower volumes were also a major contributor to the 5.0 per cent decline in petroleum and coal refinery sales.

The industry-level story - surging aerospace deliveries and lower auto sales - yielded predictable results in terms of manufacturing activity by province. Quebec led all provinces in sales growth in February, recording a 2.1 per cent increase compared to January. That growth continues a recent string of solid gains in Quebec-based manufacturing; sales from that province are up 11.2 per cent in 12 months. Meanwhile, sales in Ontario were driven down 1.1 per cent by lower auto sector output.

strong growth Quebec chart

Manufacturing sales were down across Atlantic Canada in February, while the western provinces posted mixed results. Lower output in primary metals and transportation equipment drove Manitoba's monthly sales down by 1.4 per cent, while the 1.7 per cent decline in BC was the result of lower output in chemicals and wood products. In Saskatchewan, sales were up slightly, in spite of a considerable drop in food products manufacturing. And finally in Alberta, chemicals, fabricated metals and machinery all contributed to a 1.4 per cent increase in total sales.

mfg sales growth by province chart

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