Canadian manufacturing sales jumped an “stronger-than-expected” 2.9 per cent in March, according to the latest figures from Statistics Canada and an RBC Economics report. Market expectations were for a 1.0 per cent increase.
The recent statistics is good news, following downward declines of 2.2 per cent and 3.1 per cent in February and January respectively.
Aerospace was a big driver of the March increase, reflecting a 42.3 per cent jump, retracing a 29.4 per cent drop in February.
Statistics Canada noted that a weaker Canadian dollar had an impact on aerospace production as the value of US-denominated sales and inventories increased in Canadian dollar terms. Auto sales also rose solidly, jumping 12.8% in March as factory retooling, which was largely blamed for an 18.9% sales drop over the first two months of the year, began to wind down.
Excluding these two components, sales were more mixed, although they still increased 0.7% on balance to build on a 0.5% gain in February. Sales of food (+3.0 per cent), petroleum and coal products (+1.9 per cent), and primary metals (1.5 per cent) offset a 3.6 per cent drop in fabricated metal product sales.
Excluding the impact of prices, the volume of manufacturing jumped 2.9% in March although that only partially retraced outsized declines of 3.0% (was -2.5%) and 2.4% (was -2.5%) in February and January, respectively.
On a regional basis, the gain in March manufacturing sales was concentrated largely in Quebec (+6.9 per cent) and Ontario (+2.6 per cent). The main source of partial offset was a 2.2 per cent drop in British Columbia.
According to Nathan Janzen senior economist for RBC Economics says the rebound in manufacturing volumes in March is “encouraging” and “supports the view that weakness earlier in the quarter was largely the result of the transitory impact of bad weather and temporary retooling shutdowns at auto manufacturers rather than a fundamental deterioration in demand. Although the rise in aerospace sector sales likely will not be reflected in March GDP estimates (alternative source data is used to compile aerospace GDP due to volatility in the manufacturing sales data), strength in manufacturing sales ex-aerospace is still consistent with our assumption that GDP managed to increase 0.1 per cent in the month despite indications that investment in the oil sector continued to slow.”
Following unchanged GDP in February and a 0.2 per cent decline in January, Janzen notes that this would be consistent with flat GDP in Q1 although the strengthening in the manufacturing sector late in the quarter is consistent with our view that growth will rebound to a 2.8 per cent rate in Q2 as activity in the oil sector remains restrained but the impact of weather and transitory production disruptions on Q1 activity reverse.
