Canada Factory Sales Advance 1% in March -- Update

Canadian manufacturing sales rose in March to a record level, based on strong performances in the automotive and food-processing sectors. Marring the results were a weak advance in volumes and a notable downward revision to the previous month's data.

Factory sales advanced 1% on a seasonally-adjusted basis to 53.85 billion Canadian dollars ($39.61 billion) in March, Statistics Canada said Wednesday. That fell short of market expectations for a 1.3% increase, according to economists at Royal Bank of Canada.

February's data were also revised, and now indicate sales fell by a steeper 0.6% in the month from the previous estimate of a 0.2% decline.

The data-gathering agency added that on a volume, or price-adjusted, basis, factory sales increased by a tepid 0.2%. Economists eye volumes to get a better gauge on economic activity. Before the data release, economists at BMO Capital Markets anticipated a gain in volumes closer to 1%.

On a 12-month basis, manufacturing shipments rose 8.2% in March.

Factory sales were anticipated to end the first quarter on a strong note, after an encouraging rebound in exports reported earlier in the month. The trade figures had fueled optimism that a much-anticipated pickup in nonenergy exports and a revival in business investment were finally taking shape, and would help offset an expected slowdown in housing investment and consumer spending.

"It's still a 1% increase," said Jimmy Jean, economist at Desjardins Capital Markets in Montreal, adding that sales would have showed a faster gain were it not for the downward revision in the previous month. He added the 6.6% one-year gain in nonenergy products offer optimism about the outlook.

Derek Holt, economist at Bank of Nova Scotia, said the miss on expectations and the fact March's rise was due largely to higher prices "make for generally softer-than-implications" for the factory sector's role in driving growth in the coming months.

The factory-sales results, which fell short of expectations, are likely to reinforce the Bank of Canada's cautious view on the outlook. Bank of Canada Gov. Stephen Poloz has warned that trade-policy uncertainty in Washington poses a significant headwind to growth because firms might grow hesitant to hire and invest without knowing what a revamped North American trade pact will look like. Most Canadian market watchers don't expect the Canadian central bank to begin raising rates until next year.

As for March's manufacturing data, Statistics Canada said the results were powered by a 4.5% rise in sales of motor vehicles to C$5.95 billion and a 1.8% advance in auto parts to C$2.55 billion. Excluding the auto sector, factory shipments in March rose 0.5%.

Meanwhile, the food-processing sector posted a 2.6% rise in sales, hitting a record level of C$8.91 billion, led by meat and dairy. On volume terms, sales in the food component increased 2.2%.

Weighing on results was a 1.7% decline in sales in petroleum and coal products, to C$4.96 billion, which the data agency said reflected lower prices. In volume terms, sales fell 0.2%.

The report said inventories rose 1.2% to hit a record C$72.68 billion, or the fourth consecutive monthly increase. A rise in inventories suggests production exceeded consumption.

Two forward-looking gauges indicated strong demand in the offing, as unfilled orders -- or the stock of orders that will contribute to future sales assuming they are not canceled -- rose 1.8% while new orders climbed 2.6%.

Write to Paul Vieira at

(END) Dow Jones Newswires

May 17, 2017 09:52 ET (13:52 GMT)