Manufacturing sales dip in July but rise year-over-year

Following a 3.6 per cent increase in June, manufacturing sales in Canada fell 1.5 per cent in July to $59.6 billion, according to a report released Tuesday by Statistics Canada.

Sales on an annual basis, however, have risen by 12.2 per cent.

In Alberta, while manufacturing sales dipped by 1.7 per cent in July to $7.1 billion, they were still up 39.6 per cent year-over-year.

According to ATB Economics, in its The Owl, daily economic update, while still much higher than the year before, the seasonally adjusted value of manufacturing sales in Alberta contracted by 1.9 per cent ($136.9 million) in June and by 1.7 per cent ($123.5 million) in July.

“Lower wood product sales was the main reason for the drop. After climbing to an impressive $946.9 million in May, wood product sales were $646.0 million in July. Despite this, sales in July were still 71.4 per cent higher than the five-year average,” it said.

“The machinery sector had a good month in July with sales up by $66.2 million (13.9 per cent) as did food manufacturing with its sales higher by $60.7 million (3.4 per cent).”

Statistics Canada said that in July across Canada sales were down in 12 of 21 industries, led by the wood product (-21.8 per cent), aerospace product and parts (-19.0 per cent), miscellaneous (-12.1 per cent) and petroleum and coal product (-2.3 per cent) industries. The declines were partially offset by higher sales in the motor vehicles (+13.5 per cent), primary metal (+3.9 per cent) and motor vehicle parts (+7.6 per cent) industries. 

“Sales of petroleum and coal products fell 2.3 per cent to $5.8 billion in July on lower sales at refineries in Eastern Canada. Sales on a constant dollar basis decreased 5.1 per cent in July, while prices for refined petroleum energy products rose 2.9 per cent. Nevertheless, sales were up 63.7 per cent year over year,” said StatsCan.

It said total inventories rose 2.6 per cent to $93.9 billion in July, the seventh consecutive monthly gain, on higher inventories in the primary metal (+9.4 per cent), machinery (+5.4 per cent) and fabricated metal product (+3.6 per cent) industries. Total inventories declined the most in the chemical product industry (-5.6 per cent).

“The inventory-to-sales ratio increased from 1.51 in June to 1.58 in July. The ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.”

Omar Abdelrahman, Economist with TD Economics, said it’s one step forward, two step backwards for Canada’s manufacturing sales.

“Just as auto sales are starting to show signs of life, other industries are taking a bite out of growth. July’s release adds to the list of recent indicators pointing to a soft patch in Canada’s economy early on in the summer, and adds credence to Statistics Canada’s expectations for a 0.4 per cent decline in real GDP in July,” he said.

“It could get worse before it gets better for the manufacturing sector. August’s Labour Force Survey data revealed declines in employment and hours worked, a negative signal for output in the industry during the month. But it’s not all gloom. PMI indicators suggest that sentiment in the industry is still solid in both in Canada and the United States. The outlook, however, remains clouded by supply chain disruptions. Should these constraints continue to gradually dissipate, a normalization in auto production (which remains far detached from pre-pandemic levels) could provide a decent lift to overall manufacturing output in the coming quarters.”

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