Canada’s Manufacturing Sales Tumble in September    

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Canada’s factory sales fell 3% (month / month) in September – a slightly smaller decline than Statistics Canada’s lightning estimate (-3.2%). The picture was more disappointing after a calculation of price effects, with production shipments declining by 4.2% in the month.

The decline in nominal sales encompassed 12 of the 21 industries. However, it was again, mainly a history of auto sector. Sales of motor vehicles fell 35.6%. Sales were also weak in the primary metals (-6.3%), plastics and rubber (-3.6%), and chemical (-1.8%) industries. Strong sales in the oil and coal industry (+ 3%) provided some compensation.

Inventories rose 1.3% in the month, raising the inventory-to-sales ratio to 1.67 (from 1.60 in August). Previous indicators were mixed, with new orders down 3% and unfilled orders up 0.6%.

Key Implications

The downturn and flow of Canada’s production sales continues to be dictated by continued supply disruptions in the automotive sector. September sales were particularly pronounced, leaving sales in the motor vehicle industry 60% below pre-pandemic levels and lowest since May of last year. The widespread weakness across other industries in the September manufacturing report rubbed salt to the wound.

The short-term outlook for the manufacturing sector remains unclear. On the one hand, sentiment remains particularly strong in Canada and the United States, as evidenced by recent releases of PMI. This optimism should be further confirmed by continued resilience in labor markets and consumer demand. However, supply limits leave their mark on the industry. These disruptions may take time to dissipate, and survey responses have suggested they may last until 2022.

Source

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