Manufacturing Sales Analysis – July 2016

Manufacturing sales flat in July as gains in BC and Quebec offset weakness elsewhere

After a solid increase in June, manufacturing activity was essentially flat in July. Overall sales increased by less than 0.1 per cent to reach $50.7 billion for the month. The good news is that there has been a relatively steady increase in manufacturing output since March, when sales dipped below the $50.0 billion mark.

Mfg sales in Canada

For the moment, total manufacturing sales through the first seven months of 2016 are still higher than they were at the same point last year - by about 0.2 per cent. However, for the past several months, year-over-year sales have been tracking below 2015 levels. Barring a significant turnaround, 2016 is shaping up to be a weaker year for manufacturing compared to the previous two years.

MFg sales by month

Forward-looking indicators are mixed, suggesting little reason to expect a major turnaround in the coming months. On the bright side, there was a modest increase in new (non-aerospace) orders, which rose above $50.0 billion for the first time since February. At the same time, however, total (non-aerospace) inventories were up 1.3 per cent to reach their highest level since November. While about one third of that increase is the result of price effects on refined petroleum stores, the remainder signals a continued lack of robust demand for manufactured goods.

At the industry level, output was mixed in July. Commodity-based manufacturing in general had a strong month, while industrial production was down. On the positive side, there was a sharp spike in food processing activity in Canada, which jumped by about 1.9 per cent to hit another new all-time monthly high of just under $8.5 billion. Food processing has been one of the brightest lights in Canadian manufacturing this year; while overall manufacturing output has been flat, food products sales are tracking 5.4 per cent higher than last year.

food processing

There was also a welcome increase in primary metals production in July. That industry has struggled since the collapse in oil and other commodity prices reduced both demand and the value of output. In July, sales were up 2.9 per cent. While output values remain well below 2014 levels, July was the strongest month for primary metals producers since February. Sales were also higher for paper and wood products, as well as refined petroleum.

On the negative side, machinery sales were down 3.3 per cent after a spike in June. There was also a sharp drop in aerospace deliveries and in shipments of motor vehicle parts. However, that decrease in parts production was offset by higher sales of finished automobiles.

At the provincial level, there was a solid increase in manufacturing activity in Quebec, BC and New Brunswick, while all other provinces were flat or lower. In spite of being weighed down by lower aerospace deliveries, Quebec manufacturers saw overall sales increase by just under 1.0 per cent in July. That growth was fueled by solid gains in a wide range of industries, including chemicals, primary metals, electrical equipment, furniture, and food products. In BC, by contrast, most of the 2.2 per cent increase was in forest products industries.

mfg sales by industry

It was a flat month for manufacturing in Ontario, with sales essentially unchanged following June's solid gains. On the prairies, however, it was largely a bad-news story. Sales in Saskatchewan and Manitoba were down 3.6 per cent and 3.1 per cent, respectively. In Alberta, the decrease was less pronounced (at 1.5 per cent). However, that province continues to be one of the weakest performers in manufacturing so far in 2016. Year-to-date sales are nearly 13 per cent below 2015 levels. Only Newfoundland and Labrador has seen a sharper decline.

mfg sales by province

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