Canadian factory sales fell 0.6 per cent in September and new orders also declined on weaker demand for transportation equipment.
Manufacturing sales ebbed to $45.1-billion, led by a drop in the cars, car parts and aerospace sector in Central Canada, Statistics Canada said Tuesday. Sales fell in 13 of 21 industries, representing two-thirds of total sales. New orders fell 4.9 per cent.
Factory sales have declined in two of the last three months and come as demand for exports is slowing. A report last week showed the country's trade deficit near a record as exports tumbled 1.7 per cent.
The factory weakness, "was to be expected given the elevated level of the Canadian dollar, weak U.S. demand, and the moderating domestic economy," said Toronto-Dominion Bank economist Francis Fong.
Still, manufacturing sales have recovered about 45 per cent of their recessionary losses with gains in eleven of the last fifteen months, he added. Inventories have been rising, suggesting "that the improvements in demand so far are being viewed with some permanence among manufacturers and this is leading to a slightly higher level of production."
Manufacturing sales were 17.7 per cent higher in September than their recent low in May 2009, Statscan said.
Economists polled by Reuters had expected a 0.8-per-cent decline, after a 2-per-cent jump in August.
Manufacturing still expanded in the third quarter, despite the recent drop, said RBC assistant chief economist Dawn Desjardins. Even so, the annualized pace likely halved to 4.3 per cent from the 8.6-per-cent rate in the second quarter, she added.
Sales in the transportation equipment industry tumbled 7.5 per cent in the month, led by a drop in the auto industry as production declined at several assembly plants. Sales in the car parts and aerospace sectors also declined.
Fabricated metal products and paper sales also fell.
Some sectors saw higher sales. The petroleum and coal products industry and the primary metal industry tallied gains as prices and volumes increased.
Sales fell in Ontario, Quebec, New Brunswick and Saskatchewan while they rose in the other provinces.
Inventories edged 0.2 lower in September, the first drop in four months. Constant dollar manufacturing sales fell 1.4 per cent in the month.