Canada: Monthly Survey of Manufacturing, July 2017

Manufacturing sales decreased 2.6% to $52.5 billion in July, following a 1.9% decline in June. The decrease was primarily the result of lower sales of motor vehicles and motor vehicle parts. Excluding motor vehicles and motor vehicle parts, manufacturing sales increased 0.2%.

Sales were down in 9 of 21 industries, representing 57% of the manufacturing sector. Sales of durable goods decreased 4.6%, while sales of non-durable goods declined 0.2%.

In constant dollars, sales were down 1.4% in July, indicating a decline in the volume of manufactured goods sold.

Transportation equipment drops as a result of lower motor vehicle and parts sales

Sales in the transportation equipment industry fell 13.8% to $9.6 billion in July, for a second consecutive monthly decline. This is the largest monthly decrease since May 2009. The decrease was the result of declines in the motor vehicle (-19.9%) and the motor vehicle parts (-11.3%) industries. Motor vehicle assembly plants have annual shut downs during the summer months. This year, the shutdowns were longer and more concentrated in the month of July compared with previous years. Changes to vehicle models being manufactured in Canada also contributed to the decline. Sales of motor vehicle parts closely track production at the motor vehicle assembly plants. In constant dollars, motor vehicle sales were down 17.5%, while motor vehicle parts decreased 9.3%.

Decreases were also seen in the food industry (-0.9%), particularly in the meat product and seafood product and packaging sub-industries. In real terms, sales in the food industry declined 0.6%, reflecting a decrease in the volume of goods sold.

These declines were partially offset by increases in wood products (+2.3%), primary metals (+1.9%) and non-metallic mineral products (+4.4%). Sales in constant dollars for these industries increased 2.1%, 4.9% and 4.5%, respectively, indicating that higher volumes of goods sold were responsible for the gains.

Sales fall in Ontario

Sales decreased in seven provinces in July, led by Ontario and Alberta.

Sales in Ontario decreased 6.1% to $24.1 billion in July, the largest decrease since January 2009. The decrease in July was attributable to motor vehicles (-20.8%) and motor vehicle parts (-11.5%).

The sales decline of 3.4% in Alberta was driven by decreases in chemicals (-6.5%), fabricated metal products (-8.3%), petroleum and coal products (-3.0%) and food (-2.1%). Year over year, both food and fabricated metal products were up 4.4% and 13.2%, respectively. The decrease in food comes after five consecutive monthly increases.

In Quebec, sales rose 4.3% to $13.0 billion with 16 of 21 industries posting an increase. The growth was partly attributable to the primary metals industry (+9.1%). Sales also increased in the transportation equipment (+5.2%), wood product (+7.3%) and food (+2.4%) industries.

Inventories edge down

Inventories for the manufacturing sector edged down 0.2% to $73.7 billion in July. This was the third consecutive monthly decline.

The majority of the decreases came from aerospace product and parts (-2.4%), followed by primary metals (-0.9%), food (-0.7%) and chemicals (-0.6%).

The inventory-to-sales ratio increased from 1.37 in June to 1.40 in July. The increase in the ratio reflects the fact that the decline in sales was larger than the decline in inventories. The inventory-to-sales ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Unfilled orders decline

Unfilled orders fell 1.7% to $86.2 billion in July, the third consecutive monthly decline. Most of the decrease was due to a drop in unfilled orders in the aerospace product and parts (-3.9%) industry.

These declines were partially offset by an increase in unfilled orders in machinery (+2.9%) and fabricated metal products (+1.9%).

New orders declined 1.7% to $51.1 billion in July. The decrease mostly reflected lower new orders in motor vehicles, and in aerospace product and parts. These declines in July were partially offset by higher new orders in fabricated metal products, and in computer and electronic products.

StatsCanada

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell