Manufacturing sales rebound strongly in November, add boost to weak economy

OTTAWA – Canada’s factories rebounded strongly in November, hammering out a surprisingly strong 1.7 per cent gain that should add a floor to the expected soft economy during the end of last year.

Statistics Canada reported Friday that manufacturing sales increased to $49.9 billion, the highest level since May, after falling 1.2 per cent in October.

Sales rose in 12 of 21 sectors, with the largest gains coming in auto, aerospace, primary metal and chemical industries.

“This is a very solid Canadian manufacturing print, but the volatility in this reading may result in skeptics perhaps dismissing it even as the underlying details are supportive,” Scotiabank economists Derek Holt and Dov Zigler said in a note to clients.

The skepticism may have contributed to the negative reaction of the Canadian dollar, which fell 0.74 of a cent to 100.71 cents US in morning trading, they added.

In a recent report, the McDonald Laurier Institute predicted a relatively rosy picture for Canada’s manufacturing sector as a whole, and noted the industry has fared better since the 2008-09 recession than many assume.

The report said manufacturing output had expanded by 12.2 per cent from the second quarter of 2009 to the third quarter of 2012, the third fastest growth performance of any major sector in the economy.

But along with exports, manufactured shipments were hammered in the second half of 2012 by the marked slowdown in the global economy, the recession in Europe and the combination of weak U.S. demand and a strong Canadian dollar.

David Madani of Capital Economics points out that even with the strong November, the fourth quarter total is unlikely to show any improvement from the third, which also was weak.

However, given the concern about the U.S. fiscal situation that existed in November, the economist added that he was encouraged “manufacturers reported a strong increase in new and unfilled orders in November,” which are future indicators of strength.

Still, Madani said the November rebound is not enough to overcome previous setbacks.

“All things considered, the risks to our annualized fourth-quarter GDP growth estimate of 1.5 per cent still lie firmly to the downside,” he said.

In November, there were strong gains from primary metals (5.9 per cent), transportation equipment (3.8 per cent), motor vehicles (4.1 per cent), auto parts (2.1 per cent), aerospace (6.5 per cent), and chemicals (3.9 per cent).

Petroleum and coal products were only modestly up, 0.7 per cent from October, while plastics declined 1.7 per cent and wood products fell 1.4 per cent.

Regionally, Ontario’s manufacturing sales rose 3.8 per cent, while New Brunswick saw a large 11.7 per cent surge. However, Quebec, Alberta, Saskatchewan and Nova Scotia all saw a contraction in sales.