MNI 5 THINGS:Autos Drag Canadian Manufacturing Sales in August>

--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 

calculations. 

     - 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: yali.ndiaye@marketnews.com 

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