MNI DATA IMPACT: Canada Factory Sales -0.7%, Forecast +0.6%>

--Sales Have Been Sliding Since May, Now Lowest in a Year

By Greg Quinn and Anahita Alinejad

     OTTAWA (MNI) - Canadian factory sales declined in December, a 

month where every economist predicted a rise, on weakness in autos and 

aerospace production.

     Sales fell 0.7% while the MNI median was for a 0.6% increase. 

Statistics Canada on Tuesday also chopped the November decline to 1% 

from the prior 0.6%, adding to weakness that began around the middle of 

last year. Total sales of CAD56.4 billion in December are lowest in a 

year. 

     The ratio of sales to inventories also returned to last July's peak 

of 1.55, which was the highest since the last recession in 2009.

     The auto industry continued to struggle with sales dropping 6.8% 

to CAD4.9 billion on longer than normal seasonal shutdowns and the 

closure of a GM plant in Oshawa, Ontario, ending more than a century of 

major production in the city just east of Toronto. Excluding autos, 

sales rose 0.1%, led by gains at primary metal producers.

     Sales declined in 11 of 21 industries making up 43% of factory 

production. Aerospace fell 16%, weakness amplified partially by strength 

in the Canadian dollar that revalued inventories on hand in StatsCan's 

calculations.

     The decline in manufacturing plays into the Bank of Canada's 

concerns the economy entered a persistent slowdown late last year that 

may require the first rate cut since 2015. The prospect of a strong 

rebound is clouded by the piling up of inventories that will weigh on 

future production and a weeklong blockade of rail traffic between 

Montreal and Toronto that hampers movements of key chemicals and parts. 

     Manufacturing is already one of the industries at greatest risk for 

damage from global trade disputes that slow economic growth and force 

companies to break up their supply chains. 

     New orders also fell for the second time in three months in 

December with a 0.6% decline.

     For 2019 as a whole, sales growth slowed to 0.5% from 5.4% in 2018. 

Gains came in the first half of the year, and weakness in the second 

half was led by wood products.

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

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