OTTAWA — Manufacturing sales were a disappointment in December, rising a less than expected 0.4 per cent and casting some clouds over recent sunnier expectations for the economy.
Statistics Canada said Wednesday that sales inched up to $45.4 billion in the last month of the year, far less than the three per cent hike economists had expected.
The number was a bigger surprise because the agency reported on Friday that Canadian exports rose 10.8 per cent in the same month, which caused two forecasting houses to raise their projections for fourth-quarter economic growth to three per cent.
In inflation-adjusted terms, sales fell 0.5 per cent, with weakness in the aerospace sector heading the retreat.
But that didn’t stop the CIBC bank from raising its forecast on fourth-quarter gross domestic product growth by three-tenths of a point to 2.6 per cent.
“We haven’t raised our Q4 growth forecast that much compared to others, so I’m happy about that,” said CIBC chief economist Avery Shenfeld, after the manufacturing data’s release.
But he added that other indicators, aside from December’s trade number, had shown the economy gathering steam of late. In particular, he pointed to two strong months of employment gains, with January picking up 69,000 new jobs.
Analysts say exports to the U.S. will be key to the Canadian outlook this year, since the domestic economy is projected to remain subdued, particularly the housing sector.
Scotiabank economist Derek Holt said other factors may have played into the disconnect between December’s manufacturing and trade data, including snowstorms in the American northeast playing havoc with shipment patterns.
He did offer a cautionary note, however, that trade data is notoriously volatile and December’s result may turn out to be a timing blip.
Despite the weak news from Canada’s key factory sector, economists are seeing a slightly brighter prospect for the economy this year than was the case in January when the Bank of Canada estimated growth at a modest 2.4 per cent.
On Friday, the Bank of Montreal raised its projection to 2.8 per cent. The CIBC, which had agreed with the central bank, now expects Canada’s economy to expand by 2.6 per cent, starting with a robust four per cent spike in the first three months of this year.
Two forecasters — the Royal Bank and Merrill Lynch Canada — remain above three per cent, which would mean Canada will have even stronger growth this year than last.
Statistics Canada will issue the accounting on GDP for the last three months of 2010 on Feb. 28.
On December’s results, the agency noted that manufacturing sales have been moving upward at a slower rate in recent months, after increasing substantially between May 2009 and May 2010. New orders were down 1.9 per cent in a poor omen for the future.
The aerospace product and parts industry led the declines as production fell 16.6 per cent, the largest percentage decrease since September 2009. There were also decreases in the machinery industry, down two per cent, and the computer and electronic product industry, which was three per cent lower.
Sales advanced 3.9 per cent in the primary metal industry, 1.5 per cent in the petroleum and coal products industry, and 2.3 per cent in the chemical product industry.
Quebec led the provincial declines in December, with sales falling 2.8 per cent to $10.9 billion.