Canadian manufacturing sales hold flat in September as production volumes weaken

Canadian manufacturing sales were almost unchanged at C$80.2 billion in September, but the steady dollar total concealed a decline in the volume sold. Statistics Canada reported on November 13 that constant-dollar sales fell 1.5 percent, their largest monthly drop since January. Higher prices, especially for petroleum products, helped support nominal receipts even as underlying activity weakened across several industries.

Sales declined in 11 of the 21 subsectors. Primary metals fell 9.5 percent to C$7.0 billion and wood products dropped 7.0 percent. Petroleum and coal products moved the other way, rising 10.0 percent to C$11.5 billion. That increase was price-led: the same industry's constant-dollar sales fell 0.6 percent. Excluding petroleum and coal products, total manufacturing sales were down 1.5 percent. Overall current-dollar sales nevertheless remained 10.9 percent higher than a year earlier.

Quebec and Alberta show different industrial pressures

Quebec led the provincial decline, with sales down 4.0 percent to C$20.3 billion after an increase in August. Its primary-metal sales fell 16.3 percent, partly offset by stronger aerospace activity. Alberta, by contrast, reached a record C$11.4 billion, up 7.2 percent. Petroleum and coal products accounted for much of that increase; excluding them, Alberta's sales rose 1.6 percent. A strong energy-related dollar result therefore does not mean every manufacturing industry is expanding.

The quarterly comparison makes the distinction between prices and volumes clearer. Third-quarter sales rose 1.7 percent to C$239.3 billion in current dollars, a fifth consecutive quarterly increase, with primary metals and machinery contributing to the gain. After price changes were removed, sales fell 0.3 percent over the quarter. September's monthly weakness is therefore part of a broader picture in which revenue growth and physical volumes are not moving together.

Orders rise, but they are not completed sales

Unfilled orders increased 2.1 percent to a record C$136.8 billion, led by aerospace and computer and electronic products. Inventories rose 1.7 percent to C$130.5 billion, while the inventory-to-sales ratio increased from 1.60 to 1.63 months. These figures indicate a larger stock of goods and work still to be delivered, not cash already earned from future orders. The unadjusted manufacturing capacity-utilization rate edged down to 81.5 percent from 81.6 percent. The release presents seasonally adjusted sales, whereas that capacity measure is not seasonally adjusted, so the measures should not be treated as identical signals.