Manufacturing sales get a big price boost in November
Toronto, ON -- Canadian manufacturing sales increased by 1.1% in November, beating expectations, but the gain was l...
Toronto, ON — Canadian manufacturing sales increased by 1.1% in November, beating expectations, but the gain was largely due to commodity price increases on the month.
In real (constant $) terms, the picture is less rosy. After adjusting for prices changes, the volume of shipments actually declined slightly, by 0.1%, in November.
Petroleum and coal products sales were up by 7.7% in November, suggesting strongly that most of their input price increases flowed right through to output prices. Excluding coal and petroleum products manufacturers, sales were up by a more modest 0.3%. Despite the outsized price gains in the two aforementioned raw materials prices, the current dollar value of shipments did increase, albeit modestly, in a majority of industries, 11 out of 21, accounting for two-thirds of total manufacturing.
Other significant gains were posted by manufacturers of primary metals (+2.3%), transportation equipment (+2.0%), and aerospace parts & products (+1.9%).
Most of these gains were also concentrated in Ontario and Qubec, another positive given the headwinds facing central Canadian economies.
On the flip side, paper products sales were down 3% in November with no sign of stabilization due to a continued weak outlook for prices and an ongoing crisis in print media competing with online outlets. Chemical product sales also sagged during that month (-1.7%), paring back some of the large gains tallied in October.
Current and expected future sales looked decent in November. Overall new orders including and excluding autos increased significantly during that month, by 8.1% and 9.4% respectively.
Unfilled orders in November were up by close to 5%, whether including or excluding autos, mostly in aerospace. This provided a glimmer of hope that the momentum in sales would improve in December and early in 2008, the period in which U.S. and Canadian growth is estimated to have slowed significantly. In particular, the flagship aerospace manufacturers in Qubec have their order books filled, as non-U.S. demand remains strong.
However, bear in mind that November 2007 was the first increase in new or unfilled orders in four months, so the trend is still unfriendly.
The outlook for the first half of this year remains difficult. The Canadian dollar has remained above or close to parity for much of December 2007, offering little reprieve on that front. The lagged impact of a strong loonie will continue to be felt negatively by manufacturers for months to come.
Looking out further ahead to the second half of 2008, the current trend of a Canadian dollar edging back down closer to its ‘just’ value based on economic fundamentals – which suggest a Canadian dollar valued in the 90-95 U.S. cents range – should provide some stability to manufacturing shipments later in the year, a time during which the North American economy is expected to pick up the pace of growth.