CANADA DATA IMPACT: Factory Sales -1.3%, Inventories Pile Up>

By Greg Quinn and Anahita Alinejad

     OTTAWA (MNI) - Canadian manufacturing sales posted a surprise 

decline in July as automakers retooled lines to produce new models, and 

a measure of inventories reached the highest since the country's last 

recession in 2009.

     Sales fell 1.3% versus the MNI economist consensus for no change on 

the month. Ottawa-based Statistics Canada also marked down June sales to 

a 1.4% decline from the initial estimated 1.2% decrease. 

     Motor vehicle sales dropped 4.7% in July as a major assembly plant 

retooled to switch to a new model. Still, even excluding autos 

manufacturing sales fell 1% on the month, reflecting weakness across 

two-thirds of industry groups.

     The report underlines concerns about a potential global slowdown 

linked to a U.S.-China trade war, tensions in the Middle East and 

Brexit. Weaker-than-expected factory sales come as Canada's economy is 

already expected to slow significantly in the second half of the year. 

     Inventories are also piling up again, a sign companies are 

struggling to sell their goods. Canada's ratio of inventories to sales 

climbed to 1.54 in July from 1.52 in June, reaching the highest since 

the last recession in 2009. The rise came as sales declined while 

inventories swung to a 0.3% increase in July from June's 1.3% decline. 

     The other major contributor to the July decline was the metals 

industry, down 7.3% following an 11% rise in June. Iron and steel mill 

production dropped 15%, even after the end of U.S. metals tariffs 

earlier this year.

     The manufacturing capacity utilization rate also fell 4 

percentage points to 77.3% in July. That is the lowest reading since 

Statistics Canada started compiling that data at the start of 2017. 

     From a year earlier, manufacturing sales fell 1.9% in July. Sales 

have declined from a record high set earlier this year.

     --MNI Ottawa Bureau; +1 613-314-9647; greg.quinn@marketnews.com

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