Tavia Grant
Globe and Mail Update Published on Monday, Nov. 16, 2009 8:47AM EST Last updated on Monday, Nov. 16, 2009 6:36PM EST
Canadian factory sales climbed for the third month in four, with September's gains driven by a surge in car and car-part sales.
Manufacturing sales rose 1.4 per cent to $41.7-billion in the month and new order rose, Statistics Canada said Monday.
The report is the second in recent days to show relative strength in the economy. A release Friday showed Canada's trade deficit narrowed much more than expected in September.
The reports “dovetail nicely with the idea that the economy is finally setting itself up for a month of activity in keeping with the idea of economic recovery,” said Stewart Hall, economist at HSBC Securities (Canada).
Details of the report showed other improvements. New orders climbed 8.3 per cent in the month to their highest level this year. Inventory levels fell for the eighth month in a row, hitting the lowest level since February 2000.
Manufacturing may have perked up, but even with the recent gains sales remain 18.6 per cent below last September's levels. Without the auto sector, September's sales would have fallen 0.4 per cent as aerospace production hit a six-year low.
A strong dollar and tepid demand will keep a lid on longer-term gains, economists said. “Looking forward, the manufacturing sector will remain constrained by a rising domestic currency, subdued U.S. appetite, and ongoing structural shifts in global production,” said Ian Pollick, economics strategist at TD Securities in a note.
Car manufacturing led the monthly gains. Motor vehicle sales jumped 16.4 per cent to a one-year high of $3.8-billion. The rebound comes after sales sunk to $1.6-billion in January amid extended shutdowns and poor market conditions.
Car parts sales gained 13.7 per cent in September, reflecting rising motor vehicle production.
Other sectors tallying gains were primary metals and fabricated metals.
“Several plants across the country restarted production in September, pushing sales higher after maintenance shutdowns and other closures during the previous months,” the report said.
On the flip side, aerospace production tumbled in September. The aerospace products and parts industry, which tends to be volatile, fell 28.6 per cent in September to its lowest level since June, 2003, after a 34.2-per-cent drop in August.
Other declines were in chemical products along with petroleum and coal products.
Among provinces, Saskatchewan and Ontario led the gains. Saskatchewan sales jumped as a later-than-average harvest lifted food manufacturers. Petroleum and coal industries also saw increased demand due to “extended farm activity” in September.
Ontario's gains stemmed from increases in the transportation equipment industry along with petroleum and coal products.
In constant dollars, manufacturing sales rose 1.8 per cent in September.
Rising sales and falling inventory levels in September pulled the inventory-to-sales ratio down to the lowest level since last November.
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