The 2020 Mid-Year Economic Update_long

Canadian Manufacturing Sales Up 1.2% in June

Gain due to higher sales of chemical products and motor vehicles.

Canadian manufacturing sales rose 1.2 percent to $50.8 billion in June, the second consecutive gain and the third increase since January 2015, according to Statistics Canada. Constant dollar sales increased 0.5 percent, indicating a higher volume of goods sold.

Sales were up in 18 of 21 industries in June, representing 80 percent of the Canadian manufacturing sector. Higher sales of chemical products and motor vehicles led the gains. Lower sales of fabricated metals partly offset the advance.

Sales of chemical products rose 5.4 percent to $4.1 billion in June. Typically, sales of pesticides, fertilizers and other agricultural products peak in May and decline in June, once seeding in the agricultural sector has taken place. However, in 2015, some sales that normally occur in May took place in June.

Motor vehicles also contributed to the overall gains, as sales rose 4.2 percent to $4.9 billion, the third increase for the industry in 2015. On a year-to-date basis, sales of motor vehicles were up 5.6 percent from the same period in 2014. Year-to-date sales are at their highest level since 2007, the year before the industry reported significant losses as a result of the recession.

Sales of fabricated metal products fell 8.2 percent to $2.6 billion, partially offsetting the advance at the national level. A number of fabricated metal manufacturers bill upon completion of projects, which can take months or years to complete. This leads to volatility in their sales numbers. In June, some manufacturers tied to oil and gas extraction reported lower sales after finishing some long-term contracts in previous months.

Quebec posted the largest sales gain, followed by Alberta and Ontario. Declines in New Brunswick partially offset the growth.

Sales in Quebec increased 2.9 percent to $12.4 billion, partially reflecting higher production of aerospace products and parts. The aerospace industry rose 5.3 percent as some manufacturers posted higher production. There were widespread increases in other industries, such as other transportation equipment, petroleum and coal products, as well as paper products. Sales increased in 17 out of 21 industries in the province.

For a second consecutive month, sales rose in Alberta, increasing 1.9 percent to $6 billion. The gains reflected higher sales of chemical products, up 12.5 percent following a 7.2 percent decline in May. As with the industry at the national level, the increase reflects sales of pesticides, fertilizers and other agricultural products shifting into June. Lower sales of fabricated metal products partially offset the gains, down 17.8 percent, reflecting declines in the boiler, tanks and shipping containers industry.

Following two consecutive decreases, sales in Ontario increased 0.4 percent to $23.5 billion. Motor vehicle sales were mainly responsible for the growth, increasing 4.1 percent. An 8.2 percent decrease in sales of fabricated metal products partly offset the advance.

Lower sales of non-durable products in New Brunswick offset a portion of the national gains and led to the 4.7 percent decline for the province. Exports of refined petroleum products were down in June after peaking in May.

Inventories declined 0.5 percent to $71.9 billion in June, the second consecutive drop. There were decreases in 12 of 21 industries, representing 67 percent of total inventories held. Machinery manufacturers posted a 3.1 percent decline, reflecting lower inventories on hand. Inventories fell 8.1 percent in the motor vehicle industry and 1.3 percent in the aerospace products and parts industry. Finished products decreased in both industries, as manufacturers shipped more products to their customers in June. Inventories were also down in the petroleum and coal product industry (-2.2 percent).

The inventory-to-sales ratio fell from 1.44 in May to 1.42 in June. The inventory-to-sales ratio measures the time, in months, that it would take to exhaust inventories if sales were to remain at their current rate.

Unfilled orders continued their slide, down 1.8 percent from May to $93.8 billion in June. Compared with January, unfilled orders were down 6.6 percent. With this most recent decline, unfilled orders have fallen for five consecutive months, a trend that has not occurred since 2009 when unfilled orders dropped 14.3 percent over a similar five-month period.

Most of the decrease in June was a result of lower unfilled orders in the aerospace product and parts industry. A portion of the decline in aerospace products and parts reflects an appreciation in the Canadian dollar in June. Given that the majority of unfilled orders in the aerospace industry are held in US dollars, fluctuations in the value of the Canadian dollar relative to the US dollar can influence trends for the industry. Excluding the aerospace industry, unfilled orders were unchanged from May.

New orders rose 0.6 percent in June, reflecting widespread increases led by the computer and electronic product industry as well as the chemical product industry. The gains were offset by declines in the aerospace industry.

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