Economists say declining auto production will likely push down manufacturing growth for the month of October.Moe Doiron/The Globe and Mail
Declining auto and aerospace production, amid other factors, will likely push down manufacturing growth for the month of October, according to economists.
A recent spate of factory closings in Ontario's manufacturing heartland isn't helping to brighten the outlook for the longer-term general health of manufacturing.
On the other hand, a rebounding U.S. economy and the continuing easing in the value of the Canadian dollar should help exporters.
"We're expecting a modest decline of 0.1 per cent in October," Andrew Grantham, economist at CIBC World Markets, said.
"Manufacturing exports, from the data we have seen so far, are down modestly. But there is an encouraging trend out of the United States and we expect this [slump in October] to be a minor speed bump in an improving manufacturing sector," he said.
"Clearly the manufacturing sector is still struggling with the higher level of the Canadian dollar."
October should be relatively flat, with growth of 0.1 per cent, said BMO Nesbitt Burns economist Robert Kavcic, citing statistics in September indicating that order activity was slowing down.
The RBC Economics Research team sees a sharper decline of 0.5 per cent in October, taking back almost all of the 0.6-per-cent increase in September.
"The increase in the earlier month was helped by a 4.4-per-cent jump in the motor vehicles component," the report says.
"Earlier-released auto production data for October suggest that the motor vehicle component of October manufacturing sales will fall 0.8 per cent.
"Downward pressure is also expected from the aerospace component as it continues to unwind an August surge of 17 per cent with a 4-per-cent drop in October following a 3-per-cent decline in September."
The consensus estimate is for a 0.3-per-cent drop in manufacturing growth in October. Mr. Grantham expects stronger economic growth in Canada in 2014 to help boost the manufacturing sector.
Meanwhile, Kellogg Co.'s closing of its factory in London, Ont., and other recent closing announcements, are raising concerns about the state of manufacturing in the province.
"It's definitely one of the important economic themes in Ontario right now.
" It's probably one of the most important themes in the Canadian economy right now," said Mr. Kavcic.
"Manufacturing employment in Ontario is sitting very close to the lowest level on record, in the early seventies," he said.
Bertrand Marotte