Canada manufacturing sales jump in sign of third-quarter rebound

October 18, 2016 8:46 AM EDT

Supporters walk into a campaign event for Stephen Harper at a fibreglass rebar factory in Thetford Mines, Quebec, October 15, 2015. REUTERS/Mark Blinch


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By David Ljunggren

OTTAWA (Reuters) - Canadian manufacturing sales in August jumped much more than expected on widespread strength, reinforcing expectations that the country's economy will rebound in the third quarter after shrinking in the second.

Statistics Canada said on Tuesday that sales rose by 0.9 percent from July to hit C$51.12 billion ($39.02 billion) as eight of the country's 10 provinces recorded increases. Market analysts polled by Reuters had forecast a 0.2 percent gain.

Sales advanced in 15 of 21 industries, representing 69 percent of the manufacturing sector, while in volume terms sales climbed by 1.2 percent.

The Bank of Canada, which releases its latest forecasts on Wednesday, is projecting a healthy third-quarter recovery after a major wildfire in the oil-producing province of Alberta in May caused the economy to contract in the second quarter.

"(The report) will provide even more reassurance to the Bank of Canada that third quarter GDP growth rebounded strongly," Capital Economics economist Paul Ashworth said in a note to clients.

The central bank cut interest rates twice last year to help compensate for falling oil prices and is not expected to move again until early 2018. [CA/POLL]

Sales in the petroleum and coal products industry rose by 2.5 percent to C$4.38 billion in August, the second consecutive monthly gain.

"(This) does suggest we are probably seeing some of the resumption of activity in Alberta trickle through into August," said Andrew Kelvin, senior rates strategist at TD Securities.

Sales in the food industry rose by 1.7 percent in August to a record C$8.57 billion, while the primary metals industry posted a 3.6 percent gain to reach C$3.89 billion.

Derek Holt, vice president of Scotiabank Economics, said the manufacturing data were "a decent signal for August GDP growth" but noted new orders had fallen by 0.9 percent, the second consecutive drop.

"This may signal that the momentum of the manufacturing sector's acceleration is a transitory phenomenon in keeping with concerns about the durability of a third quarter pop," he said in a note to clients.

Sales of transportation equipment, the largest of the 21 industries, dropped by 1.1 percent to C$10.55 billion as unusual one-week shutdowns at some automobile assembly plants cut sales of motor vehicles. Plants usually schedule closures in July.

($1=$1.31 Canadian)

(Additonal reporting by Fergal Smith in Toronto; Editing by W Simon and Meredith Mazzilli)



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