The 2020 Mid-Year Economic Update_long

Canadian Manufacturing Sales Up 1.7 percent in December

Increase reflects higher sales in the transportation equipment industry.

Canadian manufacturing sales rose 1.7 percent in December, despite a 9.3 percent drop in sales of petroleum and coal products. The gain reflected higher sales in the transportation equipment industry, in part, due to seasonal movements in the motor vehicle and motor vehicle parts sub-industries. Sales also rose in the machinery industry.

Sales were higher in 17 of 21 industries in December, representing nearly 80 percent of total manufacturing.

Constant dollar sales were up 2.9 percent, indicating that a higher volume of products was sold over the course of the month.

Sales in the petroleum and coal product industry fell 9.3 percent in December, the sixth consecutive drop. Since June 2014, sales have fallen 24.1 percent.

Gains in the manufacturing sector were largely driven by increases in the transportation equipment industry, particularly the motor vehicle assembly and motor vehicle parts industries. Sales of motor vehicles rose 9 percent in December after falling 3.8 percent in November.

December was also busier than usual in the motor vehicle parts industry, with seasonally adjusted sales up 4.9 percent as reported declines were less than normal.

Sales of machinery grew 5.2 percent in December to their highest level since November 2011. The gain stemmed in part from increased sales in the mining and oil and gas field equipment industry. The gains in the sub-industry occurred despite the significant drop in oil prices. Some types of machinery in the mining and oil and gas field equipment industry take many months to manufacture. As such, the gains in December partly reflect the delivery of orders placed several months ago.

Food sales rose 1.8 percent in December, offsetting a 1.7 percent decline in November. Sales of chemical products increased 2.5 percent, following four months of declines.

Sales increased in seven provinces in December, led by Ontario, Quebec and British Columbia.

The 2.3 percent sales increase in Ontario reflected gains in the transportation equipment and machinery industries. Overall, 16 of 21 industries reported higher sales in December, representing 77.7 percent of total manufacturing in the province. Sales in Ontario were 5.9 percent higher in December 2014 than in December 2013.

Sales in Quebec rose 1.5 percent in December, as a result of widespread gains in the food and primary metals industries. The gain was partially offset by a drop in petroleum and coal products.

British Columbia manufacturers reported that sales were up 2.9 percent in December. Gains were reported by 14 of 21 industries. The largest gains came in the wood product industry, where sales grew 4.8 percent in December.

Meanwhile, sales were down 4 percent in Saskatchewan and 0.8 percent in Alberta. In Alberta, lower sales in the petroleum and coal product industry were partly offset by an increase in machinery sales.

Inventories in the manufacturing sector fell 1.4 percent in December as a result of lower stocks in the petroleum and coal product and motor vehicle industries.

Inventory reductions in the petroleum and coal product industry were driven largely by a 17 percent drop in raw material prices, and a decline in finished product prices, as indicated by an 11.6 percent decrease in the Industrial Product Price Index for the industry.

Motor vehicle manufacturers reduced their inventories by 22.2 percent, after rising 19.7 percent over the previous five months. Partially offsetting the declines was a 2.3 percent increase in fabricated metal product inventories.

Unfilled orders grew 0.3 percent in December, the fourth consecutive monthly increase. The increase reflected higher orders in the transportation equipment (+0.4 percent) and computer and electronic product industries (+4 percent).Orders also rose in the railroad rolling stock industry, reflecting higher demand for rail cars in North America as a result of proposed new regulations in the industry.

New orders rose 1.5 percent in December, reflecting a 10 percent increase in new orders in the transportation equipment industry.

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