Manufacturing Sales Analysis – October 2016

Manufacturing sales dip in October, ending four-month growth streak

After rising for four consecutive months, manufacturing sales dipped in October. Overall shipments fell 0.8 per cent to just under $51.0 billion, as a surge in aerospace deliveries was not enough to overcome broad-based declines in other major sectors.

Mfg sales in Canada

The good news is that, in spite of the monthly decline, year-over-year sales are now tracking above 2015 levels. Manufacturing output in October was 1.9 per cent higher than it was 12 months earlier and should remain above 2015 levels for the remainder of the year. As a result, it looks as if 2016 will be a year of positive, albeit modest, growth in manufacturing output across the country. Through 10 months, Canadian manufacturers are on track for about 0.4 per cent sales growth compared to last year.
Unfortunately, there is little evidence to suggest that this weak growth will accelerate anytime soon. The Canadian economy continues to sputter badly. GDP is on pace for less than one per cent growth this year, and what few jobs are being created are all in part-time positions. Business investment is down and demand for new manufactured goods is flat in most industries. New, non-aerospace orders fell for the second straight month in October, while manufacturers' inventories are starting to pile up. Total (non-aerospace) inventories were up 0.5 per cent in October to reach their highest level in 14 months.

MFg sales by month

As suggested above, the decline in manufacturing activity in October was spread across a wide range of activities. Seven of Canada's eleven largest manufacturing industries posted lower sales in October, while only three made notable gains. The largest declines were in sales of primary and fabricated metals, along with machinery. All three categories saw output decline by more than 2.0 per cent. Sales of petroleum and food products were also down in October.

new non-aerosapce mfg orders

The aerospace sector was the one bright spot in Canadian manufacturing in October. Sales jumped 5.3 per cent to reach their highest levels since May. Although aerospace output can fluctuate dramatically from one month to the next, both new orders and unfilled orders rose in October, suggesting that business may be picking up in that industry. Paper (1.0 per cent) and chemicals producers (1.2 per cent) also saw an increase in the value of shipments in October.

mfg sales by industry

Manufacturing sales were down in seven of the ten provinces, but the decline was concentrated in Ontario, Quebec and Alberta. Ontario sales were down $196 million (-0.8 per cent), while they were $140 million lower in Quebec (-1.2 per cent). In both cases, lower sales were distributed across a wide range of industries. Meanwhile, the $104 million decline in Alberta (-2.0 per cent) was largely concentrated in petroleum refining.

For their part, Newfoundland and Labrador, PEI, and Manitoba all saw manufacturing sales rise in October. In all three cases, October's increases came after a large drop in manufacturing activity in the previous month.

mfg sales by province

In spite of October's decline, year-over-year sales in Ontario are currently tracking well above 2015 levels. Year-to-date manufacturing sales are 4.6 per cent higher compared to the first 10 months of 2015. If that pace continues for the last two months of the year, Ontario will come close to finally breaking its all-time high of $303 billion in manufacturing sales, set in 2005.

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