Manufacturing Sales Analysis - October 2017

Auto plant strike dampens manufacturing sale growth in September

Manufacturing sales dipped slightly in October, as the since-resolved labour dispute between GM and its workers once again impacted production activity. Driven lower by the auto sector, overall sales across Canada fell by 0.4 per cent compared to September, ending two consecutive months of output growth.

At $53.5 billion in October, manufacturing sales are about 2.7 per cent below their recent peak of $55.0 billion in May. However, the return of striking auto workers to the production line will provide a boost to November's manufacturing sales numbers and will help the sector end the year on a relatively strong note.

In fact, even with the slump in output since May, 2017 is still shaping up to be a record year for Canadian manufacturers. The all-time (nominal-dollar) high for Canadian manufacturing sales was $615 billion - set in 2014. In 2017, total sales through 10 months are tracking 6.0 per cent higher compared to the same period last year and are on pace to hit $644 billion by the end of the year.

This optimism for the coming few months is reinforced by a modest recovery in demand for manufactured goods. Total new orders for the month rose by 5.3 per cent in October. Although much of that increase came in the aerospace sector, there was a respectable increase in non-aerospace orders as well; at $52.3 billion, new non-aerospace orders rose to their highest level since May.

There was a similar increase in unfilled orders as well, indicating that manufacturing have a growing backlog of work to be done. Total unfilled orders rose by 2.4 per cent in October, while the increase outside of aerospace was slightly lower, at 1.6 per cent.

Looking at output by industry, as suggested above, the decline in October was driven by the auto sector. Motor vehicles and parts production fell by $356 million (4.7 per cent), compared to an overall drop of $216 million for all manufacturing activity nation-wide. There were also smaller declines in machinery, chemicals, and plastics and rubber products.

On the positive side, petroleum and coal refining industries continued their recent surge in October, with a 2.2 per cent ($120 million) increase compared to the previous month. Although the value of refined petroleum production in Canada is still more than 25 per cent below early 2014 levels, it has nevertheless started on the road to recovery, rising by 17.8 per cent since June. October was also a good month for wood products industries, which saw output increase by 3.4 per cent. Sales were also higher in primary and fabricated metals, as well as in aerospace.

Provincially, results were mixed in October. Unsurprisingly, Ontario drove the overall decline in manufacturing sales, as provincial output fell by $531 million - a drop of 2.2 per cent. Sales were also down relatively sharply in PEI (8.0 per cent) and Manitoba (2.0 per cent).

Meanwhile, October was a good month for Alberta manufacturers where the energy sector lifted manufacturing sales up by 4.2 per cent ($244 million). Monthly manufacturing output in Alberta crossed over the $6.0 billion threshold for only the second time since February 2015. Production was also higher in BC (up 2.1 per cent), as well as Nova Scotia (6.2 per cent) and New Brunswick (3.3 per cent).

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