Canada: Manufacturing once again acting as a slight drag on growth – RBC CM

Data released today showed that manufacturing sales dropped 1.4% in December in Canada.  Josh Nye, Senior Economist at RBC Capital Markets, mentioned they don’t think the manufacturing component of GDP will be as weak as today’s number indicates.

Key Quotes:  

“The final quarter of last year was a tough one for Canada’s manufacturing sector. Sales volumes were down an annualized 4%, retracing much of the previous quarter’s increase. Emerging weakness in the energy sector was apparent with petroleum and coal sales posting sizeable declines in November and December (though refinery maintenance shutdowns were reportedly a factor as well).”

“While US manufacturing held up well toward the end of last year, the global industrial sector and manufacturing sentiment weakened over the second half of 2018. Some of that might be washing up on Canada’s shores.”

“We don’t think the manufacturing component of GDP will be as weak as this report indicates, thanks to an increase in inventories and weakness concentrated in petroleum and coal sales. A similar dynamic played out last month. That said, manufacturing was likely a drag on GDP in December.”