Canada’s manufacturing sector slowed for the second straight month in March, hurt by declining sales in autos, aircraft equipment and metals.
Statistics Canada reported that March sales were $50-billion, down 0.9% month over month, adding to the revised 4% slump in February. The decline was widespread, with 16 of 21 industries posting lower sales, representing 88% of the manufacturing sector, Reuters reported.
On a year-over-year basis, sales were down 1.6%.
But Statscan noted that on a volume basis, March sales were up 0.1%, indicating that the decline on a value basis was entirely due to weaker prices. Volumes were up 0.3% from a year earlier.
The statistical agency said transportation equipment sales fell 3.4% in value in March from February, “mostly as a result of lower production of aerospace products and parts, motor vehicle parts, and other transportation equipment.”
It added that some of the decline reflected a stronger Canadian dollar versus its US counterpart. Motor vehicle sales were down 0.6%, while auto parts sales were off 4.1%. The volatile aerospace segment fell 7%.
Primary metal sales declined 5.6% month over month, wiping out three months of gains, Statscan said.
Sales in Ontario, the country’s biggest manufacturing province, fell 1.9%. Quebec, the country’s second-largest manufacturer, fell 1.4%.
Higher oil prices will provide short-term Canadian dollar protection, but overall confidence in the Canadian economy is likely to remain weaker with further concerns surrounding the non-oil sector.
The Bank of Canada is likely to be less confident in its next policy meeting with the Canadian dollar generally slightly weaker. Overall, USD/CAD is likely to find support on dips to the 1.27/1.28 area and any fresh retreat in oil prices towards $42 p/b, combined with a more optimistic Fed, could push the pair to the 1.35 area.
