Canada: Factory output softened during the third quarter – NFB

Data released today showed that manufacturing shipments in Canada dropped 0.2% in September, a number above expectations. National Bank of Canada analyst Kyle Adams points out that today’s data suggest a negative contribution to growth in September from the manufacturing sector.

Key Quotes:

“After a significant rebound in August, manufacturing sales posted a slight decline in September (-0.2%) but managed to beat expectations for a deeper pullback. The main source of the monthly contraction was the petroleum and coals products category where sales were down for a fourth consecutive month on the back of lower volumes due to transitory maintenance at refineries.”

“The transportation category also weakened in the month as sales of motor vehicle parts and aerospace parts/products fell 4.3% and 3.7% respectively. Parts production for motor vehicles was impacted by the UAW strike and aren’t likely to bounce back in the next report as the strike only ended in late October.”

“Looking at the data in volume terms, both shipments (-0.7%) and inventories (-1.2%) marked deteriorations in September. This should translate into a negative contribution to growth in September from the manufacturing sector. Looking at the quarterly perspective, after rising an annualized 6.4% in Q2, real shipments are on track to fall 3.9% in the third quarter of the year. This drag on GDP growth will be partially offset by a 2.4% increase in inventories.”

“The unadjusted capacity utilization rate in Canada’s manufacturing sector fell from 79.7% in August to 79.2% in September.”