Canada: October’s report on manufacturing was not that bad - NBF

Manufacturing shipments dropped 0.1% in October in Canada while the capacity utilization rate retraced 1.2% to 80.7%.  Jocelyn Paquet, analyst at National Bank of Canada, points out that manufacturing shipments was not as bas as it looked.

Key Quotes:

“Canadian manufacturing shipments came in below expectations in October as sales fell for a fifth consecutive time in both the primary metals and wood products categories. The latter segment has had to deal with a significant drop in the price of lumber recently, partly the result of stalling housing starts on both sides of the border. Since May, the month in which prices started slumping, shipments of wood products are down no less than 15.7% (9.3% in volume terms), with the effects being felt particularly acutely in British Columbia.”

“Apart from that poor performance, October’s report on manufacturing was not that bad. Sales increased in no less than 14 of the 21 broad industries and 7 of the country’s 10 provinces. In volume terms shipments actually improved and inventories posted a healthy increase. This should help GDP growth rebound in October following a slight retreat in September.”

“Looking further ahead though, the manufacturing sector may face some headwinds. Inventories are at their highest since the recession compared to sales, hardly the harbinger of a ramp up in shipments. Still, the new USMCA deal, which in our baseline scenario will get approved by U.S. Congress, should provide some lift to Canada’s manufacturing sector in the coming months.”