Manufacturing sales in Canada grew in March as the country’s automotive industry became healthier, driven by a resurgence in vehicle sales south of the border, Statistics Canada reported Monday.
The federal agency said auto sales grew 4.1 per cent in March, the eighth advance for the sector in the last 12 months, which helped total manufacturing sales inch closer to levels seen before the economic downturn.
Francis Fong, an economist at TD Economics, said the higher auto sales were due to demand in the United States growing back to pre-recession levels and those vehicles are either built in Canada or their parts are made or assembled north of the border.
About 85 per cent of auto industry products made in Canada are exported to the United States, according to the Canadian Auto Workers union.
“There’s a lot of co-operation between Canada and U.S. manufacturers, so when auto demand increases on either side of the border that tends to benefit both countries,” Fong said.
“You’re starting to see (American) job growth pick up and now you’re starting to see auto demand pick up and then we’re benefiting from that, not just our manufacturing sector but our export sector in general, has been benefiting from this surge of U.S. demand.”
Manufacturing sales in all sectors totalled $141.6 billion in the first quarter, making them the highest since the third quarter of 2008 and creeping closer to that pre-recession level of $154.9 billion.
The 2008-09 financial crisis began to have a serious impact on Canada at the beginning of the fourth quarter of 2008.
Canada’s manufacturing industry was pummelled during the economic downturn as demand for goods like cars hit the floor. But the world’s biggest automakers have been reporting a recent surge in consumer demand, with Ford Canada reporting its best April in more than a decade.
Analysts have found global auto sales continuing to strengthen despite both increased gasoline prices and a sharp plunge in Japan following the March 11 earthquake and tsunami.
Fong said he expects the U.S. trend for higher demand to continue as more Americans who lost their jobs in the economic downturn find new ones and want to buy cars again.
Canada’s automotive industry is massive, employing 100,000 workers in assembly and parts production, with the total value of automotive shipments being worth about $65 billion a year, according to the CAW.
Statistics Canada said manufacturing sales in all sectors increased 1.9 per cent to $47.5 billion in March after a 1.8 per cent decline in February.
Sales in the transportation equipment industry, including planes and aircraft, parts grew 6.3 per cent, accounting for just over half the gain in all manufacturing sales.
Canada also saw 20 per cent higher production in aircraft and aircraft parts, but the aerospace industry is not an accurate indicator of trends in manufacturing as a whole because the numbers can grow substantially if a company like Bombardier Inc. (TSX:BBD.B) fills a large order that month.
In a research note, Scotiabank economists Derek Holt and Karen Cordes Woods said much of the manufacturing sales strength in the first quarter was actually due to distorted numbers in January because of unseasonable weather and plant shutdowns in November and December.
“But what is key in this report is that constant dollar shipments rose by the same amount as nominal shipments, suggesting that volumes accounted for all of the growth,” they said.
“This will provide a solid lift to March GDP when (data are) released at the end of month,” they wrote, adding that the second quarter will be negatively affected by the impact of the Japanese earthquake and tsunami, which disrupted supply chains and production around the world.
Canada also saw higher sales in agricultural, construction and mining industry machinery, making the sector a $2.7-billion business during the month —a full $600 million higher than its most recent low of $2.1 billion in October 2009.
Statistics Canada also said sales in the furniture, paper, computers and electronics and food industries grew in March.
Fifteen out of 21 industries, or about 80 per cent of the industries, reported higher sales during the month.
In March, nine provinces posted higher manufacturing sales than in February, led by Quebec and Alberta.
Sales crept up only 0.1 per cent in Ontario, the province hardest hit in the recession, led by a 4.7 per cent increase in the motor vehicle industry.