Manufacturing Sales Analysis – January 2017

Manufacturing sales continue to rise in early 2017

After surging in November and December, manufacturing sales continued their upward climb in early 2017. December had been a record month for current-dollar manufacturing output, with total sales of $53.5 billion. Manufacturers built on those gains in January, with sales rising by 0.6 per cent to reach $53.8 billion.

mfg sales Cda chart

A hacking incident in mid-March has significantly affected access to Statistics Canada data on many of the details behind these gains. However, a newly-released data series on inflation-adjusted manufacturing output points to additional good news for the sector: the increase in sales was driven largely by volume and not price effects. The total value of price-adjusted manufacturing activity in January was up 0.7 per cent compared to December. This suggests that output was up strongly in spite of the fact that, on average, manufacturers received lower prices for their goods that month.

mfg new orders chart

Adding even further to the good news, forward-looking indicators point to strengthening demand for manufactured goods in Canada. While there was a jump in inventories in January (up 1.1 per cent), there was an even larger surge in new manufacturing orders. New orders rose by 4.6 per cent to reach their highest level since July 2015.

At the industry level, January's gains were concentrated in the non-durable goods sector. Sales of non-durables rose by 2.3 per cent, compared to a decline of 0.8 per cent on the durables side. More specifically, petroleum refining and chemicals production were the big winners in January, with sales growth of 7.0 per cent and 2.5 per cent, respectively.

growth in non durable chart

On the durable goods side, the outlook continues to improve for fabricated metals producers who have struggled mightily over the last two years. For the second consecutive month, output at Canada's fab shops was up by about 2.4 per cent. While the industry has a long way to go before it fully recovers from the impact of the decline in oil prices, it is starting to head in the right direction.

growth in durable chart

The aerospace industry accounted for most of the decline in durable goods activity in January. Deliveries of aircraft and parts dropped by 11.8 per cent to their lowest level in at least two years. There was a similarly steep decline in production of other transportation equipment (not including motor vehicles). Rail stock output was cut in half in January, while shipbuilding activity was down by 14.1 per cent. For its part, motor vehicle and parts production was up by about 2.2 per cent.

Looking at specific provinces, January's gains were relatively widespread as seven of the ten provinces saw factory output rise. Leading the way on a percentage growth basis was PEI, where manufacturing activity surged ahead by 17.5 per cent to reach a new monthly all-time high. On the east coast, both New Brunswick and Newfoundland and Labrador saw strong sales growth January, while output in Nova Scotia dropped by 5.3 per cent.

mfg sales growth by province chart

In Central Canada, January's results were mixed. The decline in aerospace production contributed to a 1.5 per cent decline in overall output in Quebec, while in Ontario, sales rose by about 1.0 per cent.

In the West, the three Prairie Provinces all posted healthy gains in January, led by Saskatchewan, where output rose by 3.4 per cent. In BC, however, manufacturing activity was down slightly, falling by 0.3 per cent compared to December.

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