Canada: Bounce back in manufacturing sales in November – RBC Economics

Nathan Janzen, Senior Economist at RBC Economics, notes that the Canadian manufacturing sales bounced back in November as the nominal sales rose 1.5%, largely reflecting higher volume sales, following a 0.6% October drop.

Key Quotes

“In volume terms, sales rose 1.2% in November following a 1.6% drop in October.  Year-over-year, volume sales were also up 1.2% in November, matching the October increase.”

“Much of the increase in nominal sales (about half) was accounted for by a large 9.1% jump in the primary metal component that more than retraced an 8% decline over the prior two months.  As expected, the value off petroleum and coal sales bounced back 3.7% reflecting the end of maintenance shutdowns that reportedly weighed on  sale volumes in October.  The main source of offset was a pullback in the transportation sector (-2.3%) that in turn reflected in large part a 7.4% drop in the often-volatile aerospace component although motor vehicle sales also declined by 0.6%.”

Our Take:

  • The rebound in November is consistent with our view that, looking through monthly volatility, the underlying trend in the sector remains modestly positive reflecting a continued easing in the drag from the oil & gas sector and a modest pickup in U.S. demand.   In terms of overall GDP implications, the details of report suggest that November manufacturing output likely retraced about half of an outsized 2% decline in October which, alongside a pickup in November exports, suggests that overall GDP may have retraced much of the 0.3% October decline.
  • We continue to expect economic output rose 1.5% (at an annualized rate) in Q4 which also remains consistent with the Bank of Canada’s updated call in yesterday’s updated Monetary Policy Report.” 

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