Manufacturing rebound bodes well for Canada's oil-shocked economy
Canada’s factories have hit a milestone that bodes well for the country’s oil-shocked economy.
Manufacturing sales climbed 2.3 per cent in January to top $53-billion, marking the highest level on record, Statistics Canada said today.
Notable, too, is that today’s report marked a string of monthly gains, pointing to strength that can help offset the hit to the oil patch and the commodity-dependent provinces.
“We remain optimistic that much of these gains will be sustained in coming months as the past declines in the loonie and robust U.S. domestic demand continue to support Canadian shipments,” said Toronto-Dominion Bank economist Warren Kirkland.
“We expect that most of the upside remains to be seen across Ontario, Quebec and B.C., but other provinces should share in the spoils also.”
The Statistics Canada report far surpassed what economists had projected, underscoring the fact that the volumes of Canadian goods sold are “returning to their pre-recession highs,” Mr. Kirkland added.
The stronger showing was driven by sales of autos and parts, which accounted for 85 per cent of the gains. Petroleum and coal products, in turn, slumped almost 6 per cent amid lower prices.
“Canadian exports are starting to show signs of life, and factories are responding in kind,” said Nick Exarhos of CIBC World Markets.
While the oil provinces will continue to suffer, others will, at least, help pump up Canada’s gross domestic product.
“Although we assume that a decline in mining output and the ongoing pullback in investment in the oil and gas sector will be factors liming the gain in overall GDP in January, today’s data suggest that GDP rose 0.2 per cent in the month,” said Royal Bank of Canada senior economist Nathan Janzen.
CIBC’s Mr. Exarhos agreed, suggesting first-quarter economic growth may be poised for a rebound of between 1.5 per cent and 2 per cent.
Across the country, according to Statistics Canada, eight provinces saw manufacturing gains in January, led by the central regions.
In Ontario, shipments are now at record levels, having climbed in eight of the past nine months. In Quebec, sales are at their highest since September, 2014.
On the other side of the ledger, Alberta recorded its sixth drop in seven months on the back of oil and coal.
Manufacturing inventories rose across the country by 0.6 per cent, while the inventory-to-sales ratio slipped to 1.36 from December’s 1.39.
Unfilled orders gained 0.4 per cent and, importantly, new order bounced by 6.8 per cent.
Manufacturing rebound bodes well for Canada's oil-shocked economy - The Globe and Mail
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