Canada: Manufacturing sector may still face some headwinds - NBF

Today’s report from Canada showed that Manufacturing sales dropped 0.2% in February. Jocelyn Paquet, an analyst at the National Bank of Canada points out that looking further ahead, the manufacturing sector may still face some headwinds considering elevated inventories.

Key Quotes:

“February’s manufacturing sales came in just a tenth shy of the median economists forecast thanks to a healthy rebound in the petroleum and coal products segment, the latter boosted by rising energy prices in the month. Without petroleum and coal, however,
shipments fell no less than 0.9%, reflecting broad-based sectorial declines. Production in the wood products category, for instance, continued to shrink, settling 11.3% below its level a year ago.”

“Shipments of motor vehicles and parts have not fared much better in the 12 months to February (-8.0%) but the sharp rebound observed in auto sales in late Q1 suggests the segment might be poised for a comeback in Q2.”

“Looking at quarterly data, real shipments are on pace to slide an annualized 0.5% in Q1 following a -4.1% read the prior quarter which was the first decline registered since 2015Q4. This is consistent with our view that Canada’s GDP growth remained soft in the first quarter.”