- Headline nominal sales slipped 0.2% lower after a 0.8% January increase
- Controlling for price effects, the volume of sales fell 0.5% after a 1.5% increase in January.
The drop in volume sales in February left the measure down slightly (0.2%) from a year-ago – led by a pullback in the motor vehicle sector. Still, bad weather may be partly to blame. A record number of work hours were lost due to weather in February. The U.S. industrial sector – with which Canada’s manufacturing sector is highly integrated – still looks like it’s doing okay. And unfilled order volumes are still up 11% from a year-ago, suggesting there is some room for growth in manufacturing sales going forward.
Headline GDP growth is still likely to be soft in Q1 at around 1% but also still in part due to transitory disruptions to oil production and bad weather effects, both of which should reverse going forward. That has long been expected. The Bank of Canada’s dovish pivot in recent months had more to do with risks around the global economic outlook going forward and benign inflation trends. On the latter, data more recently has added heft to the central bank’s argument that, even with the unemployment rate right around multi-decade lows, there is room for the economy to grow further without stoking significant inflation pressures. The capacity utilization rate for the manufacturing sector is down 3 percentage points from a year ago as of February – adding to yesterday’s pullback in measures of capacity pressures in the Business Outlook Survey. In short, underlying economic trends are probably still a little better than headline economic growth numbers will show in Q1, but there is still little pushing the Bank of Canada to move interest rates higher at the moment.
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