Automotive sales drive manufacturing sales increase in July. Image: GMClick image to enlarge

Canadian manufacturing sales climbed 1.7 per cent in July, surpassing market expectations for a 1.1 per cent increase, according to the latest data from Statistics Canada.

Canadian manufacturing sales jumped by a stronger than expected 1.7 per cent in July (market expectations had been for a 1.1 per cent increase) to build on upwardly revised 1.5 per cent (was 1.2 per cent) and 0.7 per cent (was 0.2 per cent) increases in June and May, respectively. Motor vehicle sales jumped by 5.6 per cent alongside a 12.1 per cent surge in sales of parts in the sector that together accounted for more than half of the headline increase. The aerospace component also rose but by a modest 1.7 per cent; however, sales outside of the transportation sector still posted a respectable 0.6 per cent increase that built on a 1.2 per cent jump in June. 

The sales gain was concentrated in a 4.4 per cent jump in Ontario, led by gains in transportation equipment sales, with partial offset from a 1.8 per cent drop in Quebec (concentrated in the aerospace sector) and a 1.6 per cent decline in Alberta.

Manufacturing inventories rose by 1.1% in July, with gains concentrated in the transportation equipment industry, following declines of 0.5% and 0.1% in June and May, respectively.

According to an RBC Economics Research report by economist Nathan Janzen, "much of the strength in headline July manufacturing sales reflected a large jump in auto sales that was likely at least in part attributable to fewer shutdowns in the sector than usual during the traditional July auto retooling period, in the face of strong North American auto sales.

"A return to seasonally normal levels of production should result in a partial retracement in August. Because auto industry data are often volatile during summer, Statistics Canada averages production growth during the two months of July and August in compiling monthly GDP estimates, which means that strength in sales in the sector in July is not likely to be fully reflected in the monthly GDP numbers. Nonetheless, the details of the report, including a solid gain in sales outside of the transportation sector and higher inventories, still pointed to the manufacturing component of GDP posting a gain of close to 1% in July, which would mark the strongest increase since December 2014 and, along with a recent sharp pickup in exports, may be providing early evidence that Canadian manufacturers are beginning to benefit more meaningfully from stronger US growth and a weaker Canadian dollar."

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