With consumers growing more wary and home sales slumping, could a revived factory sector ride to the rescue of Canada’s economy?
That question was posed by CIBC chief economist Avery Shenfeld in emailed commentary to clients on Wednesday after the release of manufacturing sales results for March.
Manufacturing sales surprised to the upside for the month, rising 1.4% to $57.1 billion, says StatsCan. The increase was largely due to higher sales at primary metal; aerospace product and parts; fabricated metal products; and other transportation equipment industries.
“A March retreat at vehicle plants was more than offset by big gains in metals and aerospace,” says Shenfeld. Motor vehicle sales declined by 2%.
“The fly in the ointment is that capacity use in the [manufacturing] sector has been running quite high,” he says. “So for this to continue, we’re going to need more evidence of capital spending on plant expansions.”
Overall, manufacturing sales were up in 13 of 21 industries, representing 72% of the Canadian manufacturing sector.
The healthy gain points to “a decent March GDP print,” says Shenfeld. That won’t push the first quarter past CIBC’s 1.7% forecast for GDP growth, but it “sets up momentum for Q2 that will justify a Bank of Canada rate hike come July,” he says.