Manufacturing Sales Analysis – June 2016

Sales rise in June on recovery in machinery and auto production

Manufacturing sales activity was up in June, buoyed by a rebound in machinery and auto sector output. All told, sales were up 0.8 per cent over May to reach $50.2 billion dollars, offsetting a similar-sized decline last month. Manufacturing output has been essentially flat since February, bouncing around the $50.0 billion-per-month mark.

With half the year in the books, total production is about 0.3 per cent higher compared to the same period in 2015. However that year-over-year growth is entirely the result of a strong performance in January. Flat growth since February has meant that manufacturing output will fall below the pace set in 2015 as early as next month and will continue to decline barring an unexpected spike in activity.

On that point, there was some good news from forward-looking manufacturing indicators in June. New orders were up 3.1 per cent in June, marking the third consecutive month-over-month increase. In addition to an expected spike in aerospace orders, there was a welcome increase in new orders for fabricated metals and motor vehicles parts - two industries which have been slumping heavily in recent months.

On an industry-by-industry basis, activity was mixed in June, with six of the eleven largest manufacturing industries recording higher sales and five reporting lower sales. As noted above, machinery producers had a good month in June, with a 5.8 per cent increase in production. That increase was welcome news for an industry that has been on a steady downward trend over the last 18 months. Similarly, motor vehicles and parts production was up 2.5 per cent in June, ending a string of four consecutive months of substantial decline. Plastics and rubber producers also had a good month in June, recording a 3.0 per cent increase in activity and reaching a new all-time monthly sales high of $2.45 billion.

At the other end of the spectrum, aerospace deliveries were down 1.8 per cent, while there were also declines in sales of food and paper products, as well as primary metals.

At the provincial level, Ontario had a solid recovery from a poor performance in May. Manufacturing activity in that province was up 1.4 per cent ($336 million), offsetting a nearly-identical decline in May. Manufacturers in Saskatchewan and Alberta also performed better in June. In Saskatchewan, sales jumped 4.2 per cent on the strength of a spike in machinery and chemicals output. After slumping badly through much of 2015, manufacturing output in Saskatchewan has risen for four consecutive months and is now at its highest level since January 2015. The same industries also drove Alberta's 1.8 per cent increase in sales in June. Meanwhile, manufacturing output was down across Atlantic Canada and in Manitoba.

Looking at 2016 to date, Ontario remains Canada's runaway leader in manufacturing sales growth. Through six months, total sales are 6.5 per cent higher compared to the same period in 2015. Only Nova Scotia comes close to that growth rate, coming in at 4.5 per cent so far this year. 

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