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Canada’s Manufacturing Sector Recovery Continued in November    

Canada’s manufacturing sales increased 2.6% (month/month) in November, following a 4.6% increase in October. The outturn was still solid after accounting for price effects, with manufacturing shipment volumes up 1.9% on the month.

The increase in nominal sales spanned 18 of the 21 industries. The transportation equipment industry (+4.9%) led the overall increase. Despite the improvement, sales levels in the motor vehicle sub-industry remained relatively depressed. Sales of primary metals (+5.8%), petroleum and coal products (+3.7%), non-metallic mineral products (+10.4%), chemicals (+2.5%), wood products (+3.2%), and food (+1.3%) were also strong.

Inventories increased 1.2% on the month, and the inventory-sales ratio edged down to 1.60 (from 1.62 in October). Forward looking indicators were positive, with new orders up 3% and unfilled orders up 0.4%.

The B.C. floods were reported to have impacted 28.1% of manufacturers (through transportation delays and raw material shortages). Statistics Canada estimated an impact of $372.1 million on sales in November.

Key Implications

Canada’s manufacturing sector recovery continued into November, despite severe flooding in B.C. November saw a second consecutive monthly increase in sales and broad-based strength across most of the sub-industries. Combined with other economic indicators, this release corroborates the view that the Canadian economy enjoyed a solid fourth quarter.

The outlook for Canada’s manufacturing sector in the coming months is mixed. Forward looking indicators (new orders) were positive, and Canada’s PMI reading alongside the ISM manufacturing index point to continued resilience in sentiment and demand. However, this strength comes against lingering global supply chain disruptions. Responses from today’s Business Outlook Survey from the Bank of Canada should help shed more light on the outlook for overall business investment and the manufacturing sector.

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