Manufacturing sales slump in August

A run of four straight months of higher sales for the country's manufacturing sector ended in August as sales slumped by 3.7 per cent, Statistics Canada said Thursday.

"Manufacturers had a notable pull-back in sales," the federal government agency said, adding that the August decline erased most of the gains made in June and July.

While the overall sales for the country's manufacturing sector totalled $52 billion in August, the extent of the drop in sales took many economists off-guard as they had expected a marginal decline of just 0.8 per cent in sales, the report adds.

In a note to clients, Toronto-Dominion Bank economist Millan Mulraine said, "The details of the report were ugly all-round, as 18 of the 21 manufacturing industries posted losses on the month."

Statistics Canada said the biggest factor in the drop was the petroleum and coal products industry, where sales have fallen by nearly $1 billion in two months.

U.S. slump starting to hit us

"On the whole the report painted a very bleak picture for Canadian manufacturing sector activity in August," Mulraine wrote, warning his clients of further declines in sales.

"Looking ahead, with the U.S. economy (the key destination for Canadian manufacturing products) continuing to weaken, and the slump in commodity prices continuing unabated, we expect to see further weakness in Canadian manufacturing activity, though the weaker Canadian dollar will provide some important offset to these headwinds," Mulraine wrote.

The drop in the petroleum and coal sector was due to falling prices — which were off by 5.9 per cent — coupled with unplanned production slowdowns at two major plants.

Petroleum and coal product sales fell 7.7 per cent in August, decreasing by over $600 million, the report said. The drop, however, was not limited to petroleum and coal, as 18 of the 21 manufacturing industries, accounting for 96 per cent of Canada's total manufacturing sales, reporting declines.

Atlantic Canada takes severe hit

Except for Saskatchewan and Manitoba, which managed to increase sales during the month, with gains of 5.7 per cent and 1.0 per cent respectively, all the other provinces saw decreases in sales, the report said.

In the Atlantic provinces, manufacturing sales fell a steep 15.4 per cent, with sales particularly weak in the food as well as petroleum and coal products sector.

Manufacturing sales in Ontario decreased 3.1 per cent, although this was only the second drop in monthly sales for the province in 2008, the report adds.

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