Canada: Manufacturing report wasn’t that bad - RBC CM

Data released today showed that manufacturing sales fell 1.4% in November in Canada.  Analysts at RBC Capital Markets point out today’s reports adds to the evidence that Canadian economic growth will look softer over the next couple of quarters.

Key Quotes: 

“The manufacturing report wasn’t as bad as the big 1.4% nominal sales drop alone implied.  Most of that decline came from a huge 13.8% drop in the petroleum & coal component — about half of which was accounted for by lower prices and the other half at least in part due to ’maintenance and turnaround work’ that will be reversed when production resumes. “

“Excluding the petroleum component, sales were little changed in November — up 0.2% in nominal terms.  Still, 13 of 21 industries posted declines. Excluding price impacts, overall manufacturing sales fell 0.9% month-over-month in November, and were up just 0.4% from a year ago.”

“The separately-reported wholesale sales volumes also declined 1.2% in November and the Canada Post strike will temporarily weigh on activity in the month.”

“Today’s data adds to the evidence that Canadian economic growth will look softer over the next couple of quarters. We are tracking a 0.1% decline in November GDP and just a 1.1% increase in Q4/18 as a whole.”

“We still expect a ’data-dependent’ Bank of Canada will ultimately view more gradual rate hikes as appropriate this year  — but very likely not until confirmation emerges that the expected slow patch over the next couple of quarters is temporary.”