Manufacturing sales had a 0.5 percent decline in June despite market expectations of a 0.3 percent gain, marking the fourth decrease in six months, according to data released by Statistics Canada.
Despite higher sales in the petroleum and coal product industry offsetting some of the declines in sales, the net growth was negative due mostly to lower sales in the miscellaneous manufacturing industry as well as the fabricated metal and wood product industries.
Total manufacturing sales was reported at $48.2 billion for the month.
“The manufacturing sector continues to struggle,” Jonathan Bendiner, an economist with TD Bank, said in a commentary.
“Indeed, the level of sales remains 9.5 percent below the pre-recession peak of July 2008.”
Industry-wide Decline
Overall, 16 out of 21 industries, representing about 56 percent of the manufacturing sector, had declines in sales.
In the miscellaneous manufacturing industry, sales saw a 20.2 percent decline to $902 million, caused mostly by lower sales in jewellery and silverware manufacturing.
Lower sales in fabricated metal industry, with a 6.5 percent decline to $2.6 billion, were in part attributed to lower sales in the architectural and structural metals industry.
The decline in wood product sales, reported at 7.7 percent to $1.9 billion, was the second consecutive decline following a $2.2 billion peak in April.
The better-performing petroleum and coal product industry had a 7.4 percent hike in sales to $6.7 billion, thanks mostly to some refineries ramping up production and sales after scheduled slowdowns in previous months for maintenance work.
The transportation equipment industry also had a rise, reported at 0.7 percent to $8.6 billion, attributed to higher activity in the aerospace industry.
The report showed that the floods in Alberta had limited impact on manufacturing sales in June, as the province had a 0.1 percent increase for the month.
Positive Outlook
Nathan Janzen, an RBC economist, said in a commentary that the drop in manufacturing sales in June will limit the GDP growth in the second quarter of 2013 to a 1.7 percent rate, down from 2.5 percent in the previous quarter. But he noted that the outlook is positive.
“We expect that improving U.S. demand will allow for some improvement in the manufacturing sector in the second half of the year while a rebound in construction activity in Quebec and a boost in activity associated with rebuilding from the Alberta floods will contribute to a 3.4 percent rebound in growth in the current [third] quarter,” Janzen said.
TD’s Bendiner also said he expects market conditions will brighten up.
“Economic activity in the U.S. is expected to continue to improve over the second half of this year and into 2014, which should translate into increased demand for Canadian-manufactured goods,” Bendiner said.
National Bank senior economist Matthieu Arseneau, however, warns that gains from an improved U.S. economy could be limited because of the high inventory-to-sales ratio in Q2 reaching 1.47, the highest it has been since the second quarter of 2009 when Canada was in recession.
