"If you take the numbers at face value, the Canadian manufacturing story looks negative. The energy sector’s weakness has swept its way through the data, but a gradual recovery in oil prices, a possible easing in trade tensions, and solid domestic demand are enough to make us think the sector isn’t as bad as it looks," notes James Smith, ING's Developed Markets Economist.
Key quotes
"On Thursday we received manufacturing data for December and it wasn’t great. Sales decreased for the third consecutive month in a row (-1.3%), with the most notable declines in the petroleum and coal products industry. December’s oil price weakness was largely to blame, and as a result, Alberta’s manufacturing levels took the brunt of it; Statistics Canada reported that sales in this province fell 4.0% in December – the second consecutive monthly decline."
"Nevertheless, labour market fundamentals are good, core inflation remains around the Bank of Canada’s 2% target and – despite the numbers, the manufacturing sector should contribute a decent amount to growth this year. All of which support our view that the central bank won’t be hitting the brakes just yet – we see the next rate hike likely to be in the third quarter."
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