Canada: Falling shipments should act as a drag on Q4 GDP - NBF

Manufacturing shipments dropped 1.3% in December in Canada. Jocelyn Paquet, analyst at  National Bank of Canada, points out that despite the decline, 2018 was a good year for the manufacturing sector.

Key Quotes:

“Canadian manufacturing sales came in significantly below expectations in December. True, shipments of petroleum and coal products, which suffered from lower prices and dwindling volumes in roughly equal measure, weighed on the headline figure. But ex-petroleum sales were not stellar either, posting a 0.3% retreat in the month.”

“December’s weakness could not be blamed on prices alone, as volumes slipped 1.2%. Looking at quarterly data, real total shipments fell an annualized 4.3% in the fourth quarter, interrupting the longest streak of positive print since data collection began in 2002.”

“Falling shipments should act as a drag on Q4 GDP but that blow may be softened by a 7.8% annualized increase in real inventories, the steepest since 2017Q2.”

“This sharp upswing in inventory, as salutary as it may prove for Q4 GDP, may hinder Q1 production in the manufacturing sector.”

“The unadjusted capacity utilization rate in Canada’s manufacturing sector, meanwhile, retraced no less than 6.1% in December to 75.9%.”