OTTAWA – 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 products made in factories increased 1.2 percent to $51.6 billion in December, while sales figures for November were revised higher to 1.2 percent from one percent. 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 the about a manufacturing revival in Canada, there is still a long way to visit prior to 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 the nominal basis, which advantages of a weaker Canadian dollar, sales were below year-ago levels in 10 of 11 months to December.”
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The hope now’s the two positive months at the end of 2015 will translate into momentum in 2016. Recently, the financial institution of Canada said there were signs that the non-energy segments of the economy were starting to gain steam. Tuesday’s manufacturing report lends support to that particular statement.
The report showed that factory sale gains were observed in a number of sectors: motor vehicles, wood products, chemicals, ship and boat building and transportation equipment all registered notable increases. The 1.2 percent increase in all product which also handily beat the expectations of economists surveyed by Bloomberg, who had forecast a 0.5 percent increase.
“Looking across categories reveals relatively broad-based gains – something that was mirrored through 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 product which were sold during December than the headline number suggests.
Inventories for that month declined 1.6 per cent, with aerospace products and parts and petroleum and coal seeing the largest drawdowns. The inventory-to-sales ratio fell from 1.44 in November to 1.4 in December. The ratio represents time, in months, it might 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 annual decline because the global recession. Petroleum and coal products were the main supply of the decline, according to StatsCan, with the industry visiting a 28.6 percent stop by sales, due mainly to some 22.3 per cent drop in the typical price of refined petroleum products.
“Provinces heavily involved in the oil and gas extraction sector taken into account 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 percent on an annual basis and a pair of.4 percent month-over-month. Manitoba and Prince Edward Island were the only real other two provinces to see sales fall in December.
Quebec, Ontario and New Brunswick reported the biggest gains, with automobile and parts sales being particularly strong in Ontario.
The hope now is that the momentum seen at the end of 2015 will carry in to the year because the loonie continues to remain weak and oil prices remain depressed. Despite 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 percent last year.
“Going forward, we still believe that Canadian factories will begin reaping the benefits from the growth of the U.S. economy and the plunge of the Canadian dollar,” said Marc Pinsonneault, economist at National Bank of Canada.
jshmuel@nationalpost.com
Twitter.com/jshmuel
