Canada’s manufacturing shipments value dropped 0.9% in March after performing strongly from November 2015 to January 2016. Consensus expectation was for a decline of 1.9%. Excluding the price changes, volumes of manufacturing shipment remained same at +0.1%, marginally countering March’s downwardly revised decline. Manufacturing sector’s prices declined 0.6% m/m.
The decline was quite broad based throughout several categories in nominal terms. Out of 21 industries, sales in 16 industries declined. Majority of fall was in transportation equipment sales that fell 3.4% m/m. This indicates drop in aerospace products and parts industries. This was partially because of the CAD’s appreciation against the US dollar. Sales of primary metal also declined 5.6%, reversing the growth recorded in the prior three months.
Region wise, Ontario and Quebec recorded losses of 1.9% and 1.4% respectively, partly countering growth registered in British Columbia, New Brunswick and Saskatchewan.
New orders fell 2.2% in March, the second straight fall. Meanwhile, inventories dropped to the lowest level since January 2015. This implies an increase in production.
Manufacturing sales was anticipated to fall slightly given the strong growth recorded in several months through January, noted TD Economics in a research note. As real sales rose 2%, manufacturing is still likely to positively contribute to the Canadian economic activity in the first quarter of 2016. But the earlier months’ downward revision implies lesser strength in Q1 than expected earlier, added TD Economics.
The manufacturing data for March underpins the view that the gains in economic activity in the first quarter are expected to be more subdued that anticipated earlier and will be for a brief period of time. The Canadian economy is expected to adjust to a lower growth trajectory, noted TD Economics. Even if the demand from the US is supportive, the recent appreciation of the CAD towards 78 US cents is expected to slightly moderate the momentum of Canadian exports and eventually weigh on the nation’s manufacturing sector activity, according to TD Economics.
The material has been provided by InstaForex Company – www.instaforex.com