Statistics Canada attributes decrease to transportation disruptions, mainly the CN Rail strike in November

Canadian manufacturing sales fell 0.6 per cent in November to $57 billion compared to October, registering its third consecutive monthly decline.
Statistics Canada said Wednesday that sales were mostly impacted by an 11.7 per cent decline in primary metal sales during the month. The agency attributed the decrease to transportation disruptions, mainly the Canadian National Railway workers’ November strike over fatigue and safety concerns, for the hit to primary metal sales. The monthly sales decline was the largest metals have seen since December 2008, according to StatsCan data.
Aside from a rail strike disrupting shipments, manufacturing sales have been weakening across the board, said TD Bank economist Omar Abdelrahman.
“This is consistent with a manufacturing sector that has been facing a downturn globally,” Abdelrahman wrote in an email to clients.
November sales fell in 11 of 21 industries, representing 55 per cent of total manufacturing sales. In volume terms, manufacturing sales fell 0.8 per cent.
Sales were also down in 8 of 10 provinces, with New Brunswick leading the decline with an 8.3 per cent contraction.
A 4.2 per cent increase in transportation equipment sales helped to offset the overall decline slightly. Motor vehicle parts increased almost 9 per cent following the resolution of the United Auto Workers strike in the U.S.
But Josh Nye, senior economist at RBC Economics, predicted the auto part sales surge likely won’t be repeated.
“The closure of GM’s Oshawa plant will permanently reduce motor vehicle output,” Nye wrote. General Motors Co.’s Oshawa plant closed at the end of December after a decision to convert the plant into a test track for advanced vehicles and for parts manufacturing.
Inventory levels also increased 0.5 per cent in November, with the inventory-to-sales ratio increasing to 1.54 from 1.52 in October. The ratio measures the time it takes, in months, that are needed to exhaust inventories if sales were to remain at their current level.
“An inventory overhang needs to be worked off,” Nye wrote.
While hopes are high for the recently concluded Phase One trade agreement between the U.S. and China, analysts say it’s too early to predict a rebound.
“Further progress on trade uncertainty and a confirmation that the global manufacturing downturn is bottoming out will be needed to provide a meaningful boost to the sector,” Abdelrahman wrote.
The agreement means China will purchase an additional US$200 billion in American goods over the next two years.
The StatsCan data echoes IHS Markit’s latest purchasing managers’ index survey for December, which signalled the weakest overall manufacturing performance since August.
“December data revealed a setback for the recent recovery in manufacturing growth from the low point seen in the middle of 2019,” IHS said in its report earlier this month. “This was highlighted by the near-stagnation of production volumes and a renewed downturn in order books during the latest survey period.”
Financial Post