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Factory sales likely to falter without lift from aerospace

A Bombardier Global Express jet being manufactured at the company’s Toronto assembly plant. For October, many economists are expecting Statistics Canada to report modest, flat or negative factory sales growth, with the aerospace industry taking a hit.

Fred Lum/The Globe and Mail

Barring any unforeseen surprises, the numbers for Canadian factory sales – out Friday – aren't expected to be that encouraging.

The manufacturing sector's performance for September came in slightly better than anticipated: sales rose 0.4 per cent to $49.8-billion.

But that outcome was largely skewed by a sharp rise in aerospace shipments.

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For October, many economists are expecting Statistics Canada to report modest, flat or negative factory sales growth, with the aerospace industry taking a hit.

"The big factor is that we're seeing a reversal of strong gains in aerospace in September," said Paul Ferley, assistant chief economist at RBC Economics.

He's calling for a manufacturing sales decline of 1.3 per cent in October.

David Madani of Capital Economics sees no change in October or essentially flat growth.

One positive surprise could be a rebound in petroleum and refining after the disruptions of the third quarter, he said.

There has been some evidence of growth in the auto and truck industry and in home construction, Sal Guatieri of BMO Nesbitt Burns said in a recent report.

"Manufacturing sales are expected to climb a modest 0.3 per cent in October as the prior month's big jump in aerospace is unwound. The auto sector looks to provide some offset, with car and truck production up strongly in the month."

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Canada's manufacturers and exporters continue to face such challenges as a strong dollar, cheap imports and the global economic slump.

It's important to remember that manufacturing was the hardest hit sector in the 2008-09 recession and recovery has not been easy.

Manufacturing sales and shipments are still below the peak reached in the mid-2000s. There are signs right now, though, of positive news out of the United States, Canada's biggest trading partner.

A better-than-expected U.S. payroll tally reported on Friday helps in "reinforcing the point that Canada's dominant export market is gradually getting back on its feet," Douglas Porter, deputy chief economist at BMO Nesbitt Burns, wrote in a recent report.

Mr. Madani says there is still one major hurdle: the U.S. "fiscal cliff," which could tip the country back into recession if political wrangling in Washington over taxes and government spending cuts isn't resolved soon.

"That's still a big question mark," he said.

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