World Economy

Canada Factory Sales Slip

Canada Factory Sales SlipCanada Factory Sales Slip

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.