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Pricing out optimism

--5 Things We Learned From the Canadian Monthly Manufacturing Survey
By Yali N'Diaye
     OTTAWA (MNI) - The following are the key points from the July data 
on Canadian manufacturing sales released Wednesday by Statistics Canada: 
     - Manufacturing sales contracted 0.4% in August, less than the 0.7% 
drop expected by analysts in a MNI survey. Partly offsetting August 
decline was the upward revision to July's estimate by 0.3 percentage 
points to +1.2%. Sales volumes fell 0.3%, showing the decrease over the 
month was related to weaker activity. Despite the negative headline 
number, the report included some encouraging signs. In addition, 
assuming stable nominal sales in September, the third quarter would 
still post a 2.2% gain from the second quarter, according to MNI's 
     - Atypical shutdowns in the auto sector wwere a major drag, as 
illustrated by the 0.4% gain in manufacturing sales excluding autos, 
marking the fourth consecutive month of increase. In fact, just 7 of 21 
industries posted declines over the month, representing 50.9% of 
manufacturing trade, led by an 8.3% drop in motor vehicles. Regionally, 
sales were down in three provinces, led by Ontario. 
     - Machinery was up 2.0% on the month, and if not for a negative 
price effect, sales in that industry would be up 2.6%, a positive sign 
for investment activity in Canada. Overall, sales increased 0.5% in 
non-durable industries, while they were down 1.2% in the durable goods 
sector. Inventories rose 1.1%, lifting the inventory-to-sale ratio to 
1.43 from 1.41 in July. 
     - Forward-looking indicators were also encouraging in August, as 
unfilled orders rebounded 0.8%, more than offsetting the 0.2% decrease 
in July. New orders were up 1.1%, following two months of declines. 
     - The report also showed that the unadjusted manufacturing capacity 
utilization rate rebounded 0.7 percentage points to 80.2% in August, 
indicating increasing capacity constraints. The latter could translate 
into higher investment ahead depending on how companies respond to the 
new US-Mexico-Canada preliminary trade deal announced September 30, and 
that reduces an important source of uncertainty. While the capacity 
utilization rate fell 1.4 points to 82.3% for non-durable manufacturing, 
it increased 2.6 points to 78.3% for durable goods, led by an 8.1-point 
gain to 81.5% in transportation equipment. 
--MNI Ottawa Bureau; email: