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Canada’s factories still struggling as output unexpectedly falls in June

Statscan said Tuesday that factory sales rose by 0.7 per cent in May, the biggest decline in nearly four years.

Lars Hagberg/The Globe and Mail

Canadian manufacturing data show another decline in June, with weakness in both industrial and consumer goods.

According to numbers released Friday by Statistics Canada, manufacturing sales declined 0.5 per cent to $48.2-billion in June, the fourth month-on-month decrease in the last six months. Overall manufacturing was down in 16 of the 21 industry categories that Statistics Canada measures.

Ontario and British Columbia stood out as the biggest laggards, with sales falling 1.9 per cent and 4.5 per cent, respectively. Declines in sales of wood products, petroleum and coal accounted for the slowdown in British Columbia. While in Ontario the miscellaneous manufacturing category – including sporting goods, musical instruments and other products that aren't easily categorized – took the biggest hit, posting a 29.9-per-cent drop in sales.

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Alberta posted a slight bump in manufacturing sales in June despite floods that ravaged Calgary and other towns. Sales in the province edged up 0.1 per cent with several oil refineries ramping up production.

Quebec manufacturing sales rose 3.6 per cent, buoyed by aerospace product and parts, which saw sales rise by 13.2 per cent.

Nationwide, the biggest drop was in miscellaneous manufacturing, where sales fell 20.2 per cent, mostly due to lower sales in jewellery and silverware manufacturing. Consensus is split over what the numbers mean for Canada's economy going forward.

The broad-based decline is likely to have ripple effects for the broader measures of the economy, said Krishen Rangasamy, senior economist for National Bank.

"The drop in volumes will likely weigh on June GDP which seems destined for a negative print for the first time in six months," said Ms. Rangasamy in a research note.

However, Royal Bank economist Nathan Janzen said he thinks there is hope on the horizon.

"We expect that improving U.S. demand will allow for some improvement in the manufacturing sector in the second half of the year while a rebound in construction activity in Quebec and a boost in activity associated with rebuilding from the Alberta floods will contribute to a 3.4-per-cent rebound in growth in the current quarter," said Mr. Janzen in a note.

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But Toronto Dominion-Bank economist Jonathan Bendiner, warned the auto sector "could face more significant headwinds" with General Motors getting set to wind down production in one of its two Oshawa, Ont., plants.

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