National Post (National Edition)
Manufacturing sales rise for fourth month
Healthy results beat expectations
OTTAWA • Canadian manufacturers continue to expand their global sales, which edged up 0.3 per cent in September — the fourth-consecutive monthly gain.
Not bad, but not great either.
Still, that string of positive numbers should help keep growth in gross domestic product at an estimated 0.2 per cent in September and 3.5 per cent for annualized output in the third quarter.
The manufacturing data, released Wednesday by Statistics Canada, shows the sector “will provide a boost to economic growth,” said Dina Ignjatovic at TD Economics.
Economists underestimated factory output for September, forecasting an increase of only 0.1 per cent during the month. However, the latest manufacturing data were a few steps down from the 0.9-per-cent rise in August.
Overall, factory sales increased in 12 out of 21 sectors in September, the federal data agency reported, representing 70.1 per cent of the total manufacturing sector. Notable increases were in transportation equipment and metal products.
Sales increased in five provinces in September, with Quebec and Ontario seeing the biggest advances, while sales fell in New Brunswick, the agency said. Prices for Canada’s manufactured goods were up 0.4 per cent in September.
“Going forward, we expect manufacturing sales to remain healthy,” Ignjatovic said in an investment note. “Ongoing growth in the U.S. economy, along with the loonie hovering in the mid70-U.S.-cent range, should bode well for Canadian manufacturing goods over the remainder of the year and into 2017.”
The Canadian economy has been struggling throughout 2016, held back by stilllow oil prices from the global collapse that began hitting the market near the end of 2014 — prompting the Bank of Canada to cut its trendsetting interest rate twice last year, in January and July.
Bank governor Stephen Poloz is now weighing his options to either keep the key rate at the current level of 0.5 per cent or push it lower. He acknowledged last month that policy-makers had come very close to cutting borrowing costs on Oct. 19, but held back to give the federal government’s fiscal stimulus plan more time to gauge its impact on the economy.
Poloz will announce the next interest rate decision on Dec. 7, but that announcement will likely be overshadowed by the U.S. Federal Reserves meeting on Dec. 13-14.
With new U.S. president Donald Trump to be sworn in Jan. 20, and a new political party in power, the central bank could take a pass on raising its key rate — although the U.S. markets have been responding positively to the Trump win, an indication that a rate rise will not be far off.
“While these developments will support the rotation of growth towards nonenergy exports, the Bank of Canada is unlikely to move off the sidelines anytime soon, particularly given the new layer of uncertainty presented by the outcome of the U.S. election,” TD’s Ignjatovic said.
GDP has been on a recovery path since a secondquarter contraction this year that reflected the impact of low crude prices — with Alberta being hit hardest — and aggravated by a shutdown in oil-processing facilities caused by wildfires in the province.
“Any improvement in the Canadian manufacturing sector in the short term will likely be modest,” said David Madani, senior Canada economist at Capital Economics, in a note to clients.
“Thankfully, the worst now appears over for the energy sector, but the next big challenge for domestic manufacturers might be managing a downtown in residential construction, if recent mortgage-rule tightening pops the housing bubble.”