Canadian manufacturing sales increase 7 percent in July

Tuesday, 15 September 2020 19:18:56 (GMT+3)   |   San Diego

According to Statistics Canada, manufacturing sales increased for the third consecutive month, rising 7.0 percent to $53.1 billion in July on higher sales of motor vehicle and parts. Nevertheless, manufacturing sales remained 5.4 percent below February's pre-pandemic levels.

Excluding the transportation industry, manufacturing sales grew 3.3 percent. Sales rose in 13 of 21 industries, representing more than two-thirds (68 percent) of total sales in the manufacturing sector.

Sales in the transportation equipment industry rose by almost one-quarter (+24.1 percent) to $11.0 billion in July, mainly due to higher sales of motor vehicles and parts. Despite summer shutdowns, motor vehicle sales rose by one-third (+32.9 percent) to $5.3 billion, following a 282 percent increase in June. Many auto manufacturers shortened or skipped their summer shutdowns this year. Higher sales may also reflect lower inventories on hand. Sales of motor vehicle parts rose 38.9 percent, in tandem with the gain in the assembly industry. According to the Retail Trade Survey, motor vehicle and parts sales rose 53.4 percent in June as dealership closures ended in many regions. The Canadian international merchandise trade survey for July also shows that higher exports of motor vehicles and parts to the United States contributed to the trade gains observed for July.

Following two consecutive monthly increases, sales in the primary metal industry declined 1.4 percent to $3.5 billion in July. Primary metal manufacturing has lagged other industries during the recent recovery, in part due to metal pricing and lower domestic demand. Year-over-year sales were down 15.1 percent in July. Sales in constant dollars decreased 3.0 percent.

Total inventories decreased 0.8 percent to $86.4 billion in July, their lowest level since February 2019. Inventories declined in 15 of 21 industries in July, led by the machinery and the aerospace product and parts industries.

Inventory levels started to decrease in April as production was disrupted at many manufacturing plants due to physical distancing measures. The transportation equipment industry alone has accounted for 45 percent of the decline in total inventories since the peak in March.

The inventory-to-sales ratio decreased for the third consecutive month, falling from 1.76 in June to 1.63 in July. Nevertheless, the ratio remains above February levels (1.56). This ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level.

Manufacturing unfilled orders decreased for the fourth consecutive month, falling 1.2 percent to $92.5 billion in July—its lowest level since September 2018. The aerospace product and parts industry (-1.4 percent) contributed the most to the decrease in unfilled orders in July. Unfilled orders were also down in the fabricated metal product (-2.6 percent) and computer and electronic product (-2.4 percent) industries.

New orders rose for the third straight month, up 9.0 percent to $52.0 billion in July, partly on higher new orders of motor vehicles and parts.

The capacity utilization rate (not seasonally adjusted) for the total manufacturing sector rose from 74.3 percent in June to 74.9 percent in July. Data from the Labor Force Survey for July reported that employment in the manufacturing sector in Canada gained 29,000 in July, bringing employment to 93.6 percent of its February level.

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