Canada: Factory output softened in Q3 – NFB

In August, Manufacturing Shipments in Canada rebounded after two negative months, rising 0.8%. Jocelyn Paquet, analyst at the National Bank of Canada, explains the rebound won’t be enough to salvage a poor third quarter for factories. 

Key Quotes:

“Manufacturing sales rebounded in August following two lackluster prints in June (-1.5%) and July (-1.3%). The transportation category was the main contributor to the improvement as both the motor vehicles (+2.6%) and aerospace (+3.9%) segments saw healthy increases in shipments.”

“Looking at the data in volume terms, both shipments (+0.6%) and inventories (+0.4%) posted decent gains. Although this should translate into a positive contribution to growth in August from the manufacturing sector, it won’t be enough to salvage what looks like a poor third quarter for Canadian factories.”

“With just one month of data still to come – and September is unlikely to be great due to ripple effects of the GM strike South of the border -, real manufacturing shipments are tracking a 3.3% annualized decline in Q3. While an inventory buildup (+4.0%) in the quarter may provide some offset, ever-expanding stocks could eventually hinder production. Recall that the real inventory-to-shipments ratio now stands at a cyclical high, hardly the harbinger of a ramp up in output.”