Canadian factory activity beat expectations in June as manufacturing sales fell 1.2 per cent to $58 billion, led lower by a drop in the petroleum and coal product and food industries, Statistics Canada said in a report Tuesday.
Economists on average had expected a drop of 1.7 per cent for the month, according to financial markets data firm Refinitiv.
The move lower compared with a 1.6 per cent increase in May.
CIBC Capital Markets chief economist Avery Shenfeld said the activity held up well amid a slowing industrial sector. Sales volumes fell 0.2 per cent in June after a 1.7 per cent increase a month earlier.
Sales were down in 16 of 21 industries, representing 68 per cent of total manufacturing sales.
Sales in the petroleum and coal product industry fell 3.8 per cent to $6.3 billion in June, after five consecutive monthly increases as refineries reported lower sales, due to lower prices. Food industry sales dropped 2.5 per cent to $8.7 billion in June. Paper sales were down 5.9 per cent, plastics off 3.7 per cent and chemicals decreased 2.9 per cent.
Durable goods were up 0.7 per cent. Sales of primary metals surged 11.7 per cent in June and were partially offset by a 5.6 per cent decrease in machinery and 2.7 per cent decline in wood product shipments.
“Today’s data belied the deeper retreat seen in manufactured goods exports reported earlier in the month, but the slowing in global trade will at some point risk a greater deceleration in the factory sector,” Shenfeld wrote in a report.
“For today however, a smaller-than-expected retreat will lean to a slightly better picture for June GDP, which is still expected to be on the soft side overall.”
Lower petroleum and coal prices contributed sharp pullbacks in shipments from Canada’s two main oil-producing provinces with Alberta down 6.5 per cent and Newfoundland and Labrador 17.5 per cent lower.
Sales fell in eight provinces, with Nova Scotia down 12.1 per cent, Saskatchewan decreased six per cent and Manitoba down 5.8 per cent.
Sales climbed one per cent to $14.4 billion in Quebec, mainly due to a 16.6 per cent increase in the primary metal industry and, to a lesser extent, gains in the transportation equipment and petroleum and coal product industries, says StatCan.
For the second quarter, manufacturing sales rose 1.7 per cent to $174.5 billion. In volume terms, manufacturing sales increased 1.8 per cent in the quarter, mostly as a result of higher volumes sold in the petroleum and coal products industry (up 6.8 per cent) and transportation equipment (2.3 per cent) higher.
June’s pullback was expected after recent increases in manufacturing shipments largely driven by one-off transactions, said Omar Abdelrahman, economist for TD Economics.
“For the second quarter as a whole, manufacturing sales were up a still-healthy 1.7 per cent. This leaves our Q2 GDP tracking unchanged at three per cent but suggests soft momentum heading into the third quarter,” he wrote in a report.