Manufacturing Sales Report – March 2017

Manufacturing output hits record levels in March

Manufacturing activity in Canada recovered sharply in March as a surge in motor vehicles and food production drove output to another all-time monthly high. Sales had dipped in February by (a revised) 0.5 per cent on weaker auto sales, but a turnaround in that sector contributed heavily to overall sales growth of 1.0 per cent in March. That increase brought the value of total manufacturing activity up to $53.9 billion, eclipsing the previous monthly sales record set in January.

The recent strength in Canadian manufacturing is the polar opposite of the situation at this time last year, when sagging oil prices were driving sales of refined petroleum, fabricated metals and machinery lower. Manufacturing output growth has been accelerating on a year-over-year basis since last fall; production levels in March were 8.2 per cent higher than they were twelve months earlier.

Adding to the good news, forward-looking indicators in manufacturing were also strong in March, pointing to robust demand and continued future output growth. New orders for Canadian manufactured goods were up 2.6 per cent in March, and are nearly 18 per cent higher than they were at the same point in 2016. New aerospace orders jumped 15.6 per cent in March, while orders for other manufactured goods were 2.1 per cent higher.

These new orders will keep manufacturers busy in the coming months. After falling dramatically through most of 2015 and 2016, unfilled orders are once again on the rise as production growth is not keeping up with demand. The total value of unfilled manufacturing orders was up 1.8 per cent in March and has risen for three months in a row.

As noted above, manufacturing sales gains in March were largely driven by the auto sector and food processing. In the case of auto production, sales were up 3.5 per cent ($294 million), offsetting most of the 4.5 per cent drop in output the previous month. For food producers, however, March was yet another in a series of record-breaking months as demand for Canadian food products soars. Food product sales were up 2.6 per cent in March ($225 million) and are 8.5 per cent higher than they were a year earlier.

Although food and auto production accounted for most of March's gains, there was healthy growth in other industries as well. Sales of wood products and plastic and rubber products were higher, while producers of fabricated metals and machinery continue their gradual recovery from the impact of the oil price collapse two years ago. On the negative side, aerospace output fell back from a large spike in deliveries in February, while a drop in oil prices impacted the value of petroleum refinery output.

Three provinces accounted for most of the manufacturing sales gains in March. Ontario led the way, as auto production drove provincial sales up by $325 million (an increase of 1.3 per cent), while BC and Alberta saw gains of $113 million and $93 million, respectively.

March was also good to Maritime manufacturers. Sales were up strongly in all three Maritime Provinces, including a 14.6 per cent jump in PEI. Meanwhile, sales activity in Quebec has tapered off after a strong run in late 2016. Output was also lower in Manitoba, Saskatchewan, and Newfoundland and Labrador.
However, with one quarter of the year in the books, 2017 is shaping up to be a good year for manufacturing all across Canada. Compared to the first three months of 2016, shipments are higher in every single province, ranging from a 0.2 per cent increase in Nova Scotia to 18.5 per cent in Saskatchewan.

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