Fac­to­ries see higher sales than ex­pected

Auto sec­tor drives in­crease, mak­ing out­look ‘quite bright’ for Cana­dian man­u­fac­tur­ing

Toronto Star - - BUSINESS - CRAIG WONG THE CANA­DIAN PRESS

OT­TAWA— Canada’s fac­to­ries have re­ported bet­ter-than-ex­pected sales to start the third quar­ter — fu­elled by gains in the auto sec­tor — in another sig­nal that the Cana­dian econ­omy is sput­ter­ing back to life. Sta­tis­tics Canada re­ported Wed­nes­day that man­u­fac­tur­ing sales rose 1.7 per cent to $52.2 bil­lion in July, top­ping the 1-per-cent in­crease that Thom­son Reuters said econ­o­mists had ex­pected.

TD Bank economist Dina Ign­ja­tovic said that the out­look for the man­u­fac­tur­ing sec­tor re­mains quite bright.

“More broadly, in­creas­ing strength in the U.S. econ­omy, com­bined with a fur­ther de­pre­ci­a­tion of the loonie to 73 cents (U.S.), should trans­late into in­creased de­mand for Cana­di­an­made goods,” Ign­ja­tovic wrote in a re­port.

“Over­all, af­ter weigh­ing on eco­nomic growth dur­ing the first half of the year, the man­u­fac­tur­ing in­dus­try is on track to im­prove over the re­main­der of 2015 and should help to lift over­all growth.”

Sta­tis­tics Canada said the im­prove­ment for July re­flected an in­crease in the vol­ume of goods sold, as con­stant dol­lar sales rose 1.1 per cent.

Twelve of the 21 in­dus­tries tracked saw sales im­prove for the month, rep­re­sent­ing 62.8 per cent of the man­u­fac­tur­ing sec­tor.

The mo­tor ve­hi­cle sec­tor posted a 5.6-per-cent gain for July, while the auto parts group gained 12.1 per cent for the month as sched­uled shut­downs for North Amer­i­can assem­bly plants were shorter than pre­vi­ous years.

David Madani of Cap­i­tal Eco­nom­ics, how­ever, pre­dicted that mo­torve­hi­cle sales could slip back in Au­gust, since auto out­put in the U.S. de­clined for the month.

“Over­all, the in­crease in man­u­fac­tur­ing sales largely re­flects the gain in ex­ports al­ready re­ported for that month and doesn’t add to our view that the econ­omy most likely grew by close to 1.5 per cent an­nu­al­ized in the third quar­ter,” Madani said.

“With the fall­out from the oil price shock still un­fold­ing, we still have our doubts about longer-term growth prospects.”

In ad­di­tion to the bet­ter-than-ex­pected re­sult for July, Sta­tis­tics Canada re­vised re­sults for May and June to show stronger growth than it had ear­lier re­ported.

It said Wed­nes­day that man­u­fac­tur­ing sales for May were up 0.7 per cent, com­pared with an ear­lier re­sult of a gain of 0.1per cent. June’s growth was raised to 1.5 per cent, com­pared with the ear­lier es­ti­mate of 1.2 per cent.

The good news from the fac­tory sec­tor came as the OECD slashed its es­ti­mate for Cana­dian eco­nomic growth this year to 1.1 per cent — down 0.4 of a per­cent­age point.

The Paris-based or­ga­ni­za­tion also cut its es­ti­mate for growth in Canada next year to 2.1 per cent, a de­cline of 0.2 of a point from the OECD’s forecast in June. The down­grade came as the OECD cut its es­ti­mate for eco­nomic growth around the world to 3 per cent this year, down from 3.1per cent. For next year, world eco­nomic growth is pegged at 3.6 per cent, down 0.2 per cent from the June es­ti­mate.

The re­vised es­ti­mate by the OECD brings the or­ga­ni­za­tion in line with the most re­cent forecast by the Bank of Canada for 2015. The cen­tral bank also ex­pects the Cana­dian econ­omy to grow by 1.1 per cent this year; how­ever, it ex­pects growth to pick up to 2.3 per cent in 2016.

Canada’s man­u­fac­tur­ing sec­tor re­ported a 1.7-per-cent jump in sales for the month of July.

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