Canadian manufacturing sales surged 2.6% in February after declining 0.6% in January and 2.3% in December. Much of the strength overall resulted from an 8.7% gain in the transportation component. Aerospace sales rose 15.5% to partially retrace an 18.6% decline in January. Motor vehicle sales surged 13.5%, although this still only partially retraced declines of 6.8% and 13.9% in January and December, respectively, combined.
The volatile petroleum and coal component also provided support, rising 2.4% reflecting higher prices; however excluding all three of the motor vehicle, aerospace, and petroleum components, sales still rose a respectable 1.3% following a 1.1% gain in January.
Controlling for the impact of prices, the volume of manufacturing sales rebounded 2.5%. This marked the first gain in three months following declines of 1.0% and 3.0% in January and December, respectively, although at least part of the February gain likely reflected increases in the volatile aerospace sector. Growth in manufacturing inventories moderated to 0.9% from 1.3% in January.
While the pickup in the volume of manufacturing sales in February is encouraging to experts at RBC Economics, "part of the increase reflected rising sales in the lumpy aerospace component. Changes in aerospace sales typically have much more muted implications for monthly production estimates since production associated with sales in the sector is typically spread out over a number of months.
"As well," Canada's biggest bank concludes, "a slowing in inventory growth after a surge in January suggests that part of the gain in sales outside of the aerospace sector was drawn from existing inventories rather than new production."
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