Manufacturing sales ended 2015 on a high note: report
Canadian manufacturing sales ramped up at the end of last year, Statistics Canada said Tuesday, but the hollowed out industry still remains below its pre-financial crisis peak.
Sales of goods made in factories increased 1.2 per cent to $51.6 billion in December, while sales figures for November were revised higher to 1.2 per cent from one per cent. The bump in sales was reflected in a strong December trade report, which saw non-energy exports surge and Canada’s trade deficit unexpectedly shrink to $585 million from $1.6 billion in November.
Still, for all the hopes of a manufacturing revival in Canada, there is still a long way to go before the industry returns to its glory days.
“Activity has yet to return to January 2008 levels after eight years,” said Benjamin Reitzes, senior economist at BMO Capital Markets. “Even on a nominal basis, which benefits from a weaker Canadian dollar, sales were below year-ago levels in 10 of 11 months to December.”
The hope now is that the two positive months at the end of 2015 will translate into momentum in 2016. Last month, the Bank of Canada said there were signs that the nonenergy segments of the economy were starting to gain steam. Tuesday’s manufacturing report lends support to that statement.
The report showed that factory sale gains were seen in a number of sectors: motor vehicles, wood products, chemicals, ship and boat building and transportation equipment all registered notable increases. The 1.2 per cent increase in all manufactured goods also handily beat the expectations of economists surveyed by Bloomberg, who had forecast a 0.5 per cent increase.
“Looking across categories reveals relatively broad-based gains — something that was mirrored by the export figures released earlier,” said Nick Exarhos, economist at CIBC Economics.
In constant dollar terms, sales for December were up 1.3 per cent, which means that a higher volume of manufactured goods were sold during December than the headline number suggests.
Inventories for the month declined 1.6 per cent, with aerospace products and parts and petroleum and coal seeing the biggest drawdowns. The inventory-to-sales ratio fell from 1.44 in November to 1.4 in December. The ratio represents the time, in months, it would take firms to exhaust inventories if sales remain at current levels.
But while November and December registered strong gains, manufacturing sales actually fell for all of 2015 for the first decline since the global recession. Petroleum and coal products were the main source of the decline, according to StatsCan, with the industry seeing a 28.6 per cent drop in sales, due mainly to a 22.3 per cent drop in the average price of refined petroleum products.
“Provinces heavily involved in the oil and gas extraction sector accounted for the bulk of the manufacturing decline in 2015,” said StatsCan in its release.
Sales of products manufactured in Alberta took the biggest hit, dropping 15.9 per cent on an annual basis and 2.4 per cent monthover-month. Manitoba and Prince Edward Island were the only other two provinces to see sales fall in December.
Quebec, Ontario and New Brunswick reported the largest gains, with motor vehicle and parts sales being particularly strong in Ontario.
The hope now is that the momentum seen at the end of 2015 will carry into the new year as the loonie continues to remain weak and oil prices remain depressed. Even with the annual decline in 2015, StatsCan notes that when excluding petroleum and coal products, manufacturing sales actually increased on an annual basis by 2.6 per cent last year.
“Going forward, we still believe that Canadian factories will start reaping the benefits from the expansion of the U.S. economy and the plunge of the Canadian dollar,” said Marc Pinsonneault, economist at National Bank of Canada.