Canada: Factory output softened during the third quarter – NFB

Data released today showed that manufacturing shipments in Canada dropped 0.2% in September, a number above expectations. National Bank of Canada analyst Kyle Adams points out that today's data suggest a negative contribution to growth in September from the manufacturing sector.

Key Quotes:

“After a significant rebound in August, manufacturing sales posted a slight decline in September (-0.2%) but managed to beat expectations for a deeper pullback. The main source of the monthly contraction was the petroleum and coals products category where sales were down for a fourth consecutive month on the back of lower volumes due to transitory maintenance at refineries.”

“The transportation category also weakened in the month as sales of motor vehicle parts and aerospace parts/products fell 4.3% and 3.7% respectively. Parts production for motor vehicles was impacted by the UAW strike and aren’t likely to bounce back in the next report as the strike only ended in late October.”

“Looking at the data in volume terms, both shipments (-0.7%) and inventories (-1.2%) marked deteriorations in September. This should translate into a negative contribution to growth in September from the manufacturing sector. Looking at the quarterly perspective, after rising an annualized 6.4% in Q2, real shipments are on track to fall 3.9% in the third quarter of the year. This drag on GDP growth will be partially offset by a 2.4% increase in inventories.”

“The unadjusted capacity utilization rate in Canada’s manufacturing sector fell from 79.7% in August to 79.2% in September.”