Latest economic data fall below expectations

By Staff, with files from The Canadian Press | January 22, 2019 | Last updated on January 22, 2019
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The Canadian economy showed signs of weakness in November as both wholesale and manufacturing sales fell.

Statistics Canada said Tuesday wholesale trade fell 1% in November to $63.0 billion, more than offsetting the 0.7% increase in October.

Meanwhile, manufacturing sales fell 1.4% to $57.3 billion in November, the second consecutive monthly decrease.

Economists had expected no change in wholesale sales and a drop of 0.9% in manufacturing sales, according to Thomson Reuters Eikon.

TD Bank economist Omar Abdelrahman said the data confirm the moderating growth narrative.

“Sub-par manufacturing performance is still expected in the near-term, as Alberta’s production curtailment plan starts to reflect in manufacturing sales volumes,” Abdelrahman wrote in a note to clients.

“It is important, however, to note that these are temporary shocks. As these shocks fade, manufacturing sales should receive support from strong economic performance south of the border, a weaker loonie and expectations of increases in investment spending in the face of elevated capacity constraints.”

Royal Bank senior economist Nathan Janzen noted that labour markets still look solid and, notwithstanding recent market volatility, the U.S. industrial sector is continuing to expand.

“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,” Janzen wrote.

In emailed commentary, Royce Mendes, director and senior economist at CIBC World Markets, said today’s data could indicate GDP for November will sink below CIBC’s flat forecast. Retail sales for the month, to be published tomorrow, will provide a clearer view of monthly growth, he said.

Data details

Manufacturing sales were down in 13 of 21 industries, representing 45.3% of total manufacturing sales. In volume terms, manufacturing sales fell 0.9%.

The petroleum and coal product industry fell 13.8% due to lower prices for petroleum and coal products, as well as maintenance and turnaround work at some refineries and lower production at other others.

Partially offsetting the decline was a 1.3% increase in the transportation equipment industry and a 1.5% increase in the food industry.

Meanwhile, wholesale sales were down in five of seven subsectors. In volume terms, wholesale sales fell 1.2%.

The machinery, equipment and supplies subsector fell 2.3%, while sales in the building material and supplies subsector dropped 1.9%.

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Staff, with files from The Canadian Press

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