Canadian manufacturing sales down 2 percent in August

Canadian manufacturing sales down 2 percent in August

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According to Statistics Canada, manufacturing sales fell 2.0 percent to $52.4 billion in August, following three consecutive months of strong increases. The largest declines were in the transportation equipment and plastics and rubber industries. Excluding transportation equipment, manufacturing sales rose 1.1 percent. Total manufacturing sales in August were 6.6 percent below February’s pre-pandemic levels.

Sales in the transportation equipment industry fell 13.7 percent to $9.6 billion in August, following three consecutive months of large gains. The decline was mostly attributable to lower sales of motor vehicle assembly (-12.5 percent) and motor vehicle parts (-16.8 percent). Although several car assembly plants shortened or skipped their annual maintenance shutdowns to build up inventories in July, sales in August were weaker coming off a stronger than usual July. According to Canadian international merchandise trade data, Canada exported 6.8 percent fewer motor vehicles and parts in August.

Total manufacturing inventories edged up 0.2 percent to $86.6 billion in August, following four consecutive monthly declines. Inventories were up in 13 of 21 industries, led by machinery and food manufacturing.

Despite the growth in August, total manufacturing inventories were 1.0 percent below February’s pre-pandemic levels. Total inventories were down $2.1 billion year over year.

Following three consecutive monthly declines, the inventory-to-sales ratio rose from 1.62 in July to 1.65 in August. Just prior to the pandemic in February, the level stood at 1.56. This ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Total unfilled orders for the manufacturing sector decreased for the fifth consecutive month, falling 1.7 percent to $91.1 billion in August—the lowest level since May 2018. The aerospace product and parts industry was primarily responsible for the decline (-3.6 percent). The appreciation of the Canadian dollar relative to the US dollar in August partially contributed to the drop in unfilled orders.

Following three consecutive monthly gains, new orders fell 3.4 percent to $50.9 billion in August, mostly due to lower new orders in the aerospace products and parts industry. The declines in new orders were partially offset by an increase in new orders in the wood product industry.

The capacity utilization rate (not seasonally adjusted) for the total manufacturing sector rose from 74.0 percent in July to 75.8 percent in August due to higher manufacturing production. Manufacturing employment also continued its rebound according to the Labor Force Survey, rising 1.8 percent in August. Despite lower sales of transportation equipment in August, higher production of motor vehicle and parts led to a 4.1 percentage point increase in the capacity utilization rate of the transportation industry.

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