Canada: Manufacturing sales contract in April – NBF

Kyle Dahms, analyst at National Bank of Canada, points out that today’s factory report from Canada was weaker than expected in April and warns about the increase in the inventory-to-shipments ratio, that reached the highest since the recession.

Key Quotes:

“Manufacturing shipments fell 1.3% m/m in April to C$56.2 billion. Sales fell in 10 of the 21 broad industries surveyed including petroleum/coal products (-10.9%), transportation equipment (-2.3%) and machinery (- 4.0%).”

“The Canadian factory report came in weaker than expected in April following two healthy prints in February and March. Shipments declines were concentrated in a select few industries with petroleum and coal products accounting for a sizeable portion of the retreat. The latter industry experienced poor sales volumes stemming from transitory maintenance work at plants.”

“Of concern is the steady increase since the end of 2016 of the real inventoryto-shipments ratio, which hit an 8 year high in April after experiencing its largest monthly upswing in over 3 years and hints towards manufacturers having difficulty clearing inventory. Such an inventory buildup is not reassuring for future production, especially in a context of growing trade uncertainty.”