Canadian Manufacturing Sales Ended 2019 on Soft Note

Fundamental analysis of Forex market
  • Manufacturing sales down 0.7% in December, -0.4% excluding price impacts
  • November rail strike impact eased, but motor vehicle and aerospace sales fell

Canadian manufacturing sales continue to be buffeted by a number of ‘transitory’ factors, but underlying trends have also been soft. December marked the second straight monthly drop in sale volumes (I.E. excluding price impacts). The drag from the week-long rail strike in November appeared to ease with primary metal sales in particular bouncing back sharply in December. But the often-volatile aerospace sales component fell sharply. Motor vehicle sales were also softer-than-expected given earlier reported export and industry production data that were pointing to flattish output in December, but the widely publicized shutdown of Oshawa’s GM plant at end-of-year means a pullback there was also not entirely surprising.

Notwithstanding transitory factors adding to volatility in the headline sales numbers, underlying trends in the Canadian manufacturing sector were on the soft side at the end of 2019. An easing in US-China trade tensions – with positive implications for the US industrial sector and, by extension, Canada’s – meant 2020 started off with more optimism. But the outlook is being clouded once again by concerns about the impact on global industrial chains from the novel coronavirus outbreak and, in Canada, another round of disruptions to rail transportation via the ongoing blockade of main rail lines, particularly in eastern Canada. We continue to expect overall Canadian economic growth will remain on the soft side in early 2020 after little or no growth in the last quarter of 2019.