By Robb M. Stewart
OTTAWA--Canadian manufacturing activity cooled in May as pull back in motor vehicle sales weighed, though a rise in new orders suggests the sector carried some momentum through the quarter.
The value of factory shipments increased 0.4% from the month before to a seasonally adjusted 71.45 billion Canadian dollars, the equivalent of about US$52.38 billion, Statistics Canada said Monday.
The result was slightly stronger than the data agency's advance estimate for 0.2% rise for the month, but marks a slowdown from an upwardly revised 1.4% increase in April sales.
In constant dollars, sales also were up 0.4% for the month, to C$55.81 billion, an indication of an increase in volumes of goods and hinting at a tailwind for monthly economic growth. The industrial raw material price index declined 1.0% for the month
Canada's economy resumed growing in the early months of the year after stalling in the second half of 2023, though the latest industry-level gross domestic product data indicates momentum was lost in May after an expansion of 0.3% on the prior month in April. At the same time, while inflation has eased considerably from recent highs it picked up in May and cast doubt on whether the Bank of Canada will follow up with a second cut to its policy interest rate in late July.
Wholesale trade faltered in May after rising the month before, with sales declining 0.8% in from the month before to C$82.23 billion, weighed down by weakness in motor vehicles and parts, Statistics Canada data showed. The agency is due to release May retail sales figures on Friday.
Canada's manufacturing sector has struggled for more than a year. S&P Global's Canada manufacturing purchasing managers' index has remained in contraction territory for 14 straight months, holding steady at 49.3 in June as companies reported output, new orders, employment and purchasing all fell.
Olivia Cross, North America economist at Capital Economics, said there may be some further strength in manufacturing sales in the pipeline, given a 1.0% rise in new orders during May, but that is likely to fade in the third quarter of the year given signs of weakening sales volumes and elevated inventories.
Statistics Canada's manufacturing survey showed the rise in May was led by a rebound in the production of aerospace products and parts to the highest level on record after a decline the month before. Sales of food products also rose, to the third-highest level on record.
Countering the strength, sales of vehicles fell 4.2% to C$4.59 billion following a rise of more than 5% the month before, largely thanks to retooling efforts at an Ontario assembly plant. Despite the fall in sales, exports of vehicles and parts rose in May, mainly with shipments light trucks to the U.S.
Excluding motor vehicles, parts and accessories, manufacturing sales were 0.9% higher than the month before.
On a year earlier, overall manufacturing sales in May were down 1.8%, and motor vehicle sales alone were 12.5% lower.
Inventory levels held by factories edged up 0.2% in May, with increases in stock of transportation equipment, computers and electronics, and wood products, the agency said. Unfilled orders, the stock of orders that will contribute to future sales if they aren't canceled, 0.8% higher for the latest month and new orders were increased.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
07-15-24 1025ET
