Manufacturing Sales Report - August 2017

Manufacturing sales rise as Ontario auto production resumes

August was a rebound month for Canadian manufacturing as a recovery in the auto sector drove overall production higher. Motor vehicles and parts production were hit hard in July as extended summertime shutdowns and the shift of an assembly line to Mexico caused a dramatic decline in output that month. Auto production enjoyed a partial recovery in August, enough to drive nation-wide manufacturing sales up by 1.6 per cent to $53.5 billion - enough to regain about 60 per cent of July's losses.

Although monthly output remains below the recent $55.0 billion peak set in May, production is still tracking well above 2016 levels. Manufacturing sales in August were about 4.3 per cent higher than they were during the same month last year and total sales through eight months are tracking 6.4 per cent higher compared to the same period in 2016.

The short-term outlook for manufacturing also saw a modest boost in August, led by a spike in new aerospace orders. New manufacturing orders had been slipping since April, but rose by 4.4 per cent in August, led by a $1.8 billion jump in the aerospace sector. New orders outside of aerospace were up only slightly, however, increasing by about 0.5 per cent. Meanwhile, there was little change in producers' inventories or in the value of unfilled orders still on the books.

The main story in August was once again in the motor vehicles and parts industry. After dropping by more than 16 per cent in July, production rebounded a month later, rising by almost 10 per cent. That partial recovery ($742 million) accounted for about 88 per cent of national manufacturing sales growth in August ($847 million).

Outside of motor vehicles and parts, results were mixed in August. Leading the way on the positive side were machinery producers, who saw output rise by 4.0 per cent after dipping in July. In fact, machinery production has been one of the bright spots of the Canadian manufacturing sector this year. Output in that industry was hit hard when oil prices fell, falling by about 21 per cent from the end of 2014 to mid-2016. Since that time, output has recovered strongly and, at $3.2 billion in August, is sitting at its highest level since November 2011.

In addition to the auto sector and machinery, manufacturing activity was also stronger in petroleum refining (up 3.2 per cent), primary metals (3.1 per cent), aerospace (2.7 per cent) and wood products (1.6 per cent).

On the down side, chemicals production fell by 3.6 per cent on lower petrochemicals output, while sales of paper products (down 2.0 per cent) and plastics and rubber products (1.9 per cent) were also lower.

At the provincial level, the concentration of automobile and parts production in Ontario meant that that province was the primary growth driver in August. A month earlier, provincial output was hit hard by the auto plant closures, dropping by 6.1 per cent. August saw Ontario regain some of those losses, as total production rose by about 2.8 per cent. However, at $24.9 billion, output in the province is still well below the recent peak of $2.6 billion in May.

Outside of Ontario, most provinces saw manufacturing sales increase in August. By far the largest gains were in Newfoundland and Labrador, where sales jumped by 10.7 per cent after two months of decline. PEI and New Brunswick also made gains that month, while Alberta and BC both partially recovered their losses in July. On the down side, manufacturing output was lower in Manitoba and Nova Scotia - down 1.5 per cent and 1.2 per cent, respectively. Meanwhile, sales were effectively flat in Quebec and Saskatchewan.