The Bank of Canada should be pleased with a year-end rebound in the Canadian manufacturing sector, according to new report from Scotiabank.
Statistics Canada said manufacturing sales in the fourth quarter of last year rose by about 2.8 per cent to $164.8 billion, driven in part by higher sales of petroleum and coal products, but mostly due to higher prices.
The rise in the three months to December followed a 1.8 per cent decrease in sales in the previous quarter.
“I would think that on net the [Bank of Canada] will be encouraged by the magnitude of the rebound in the manufacturing sector over the fourth quarter relative to the soft patch in [the third quarter],” said Derek Holt, economist at Scotiabank in a note on Friday.
Holt pointed out that fourth-quarter manufacturing sales volumes were up by a “quite solid” 4.4 per cent from the third quarter on a seasonally adjusted and annualized rate. That offsets the 1.4 per cent decline seen in July to September period.
While the fourth quarter, as a whole, was up, manufacturing sales in December was down.
Statistics Canada said sales declined 0.3 per cent to $55.5 billion, following a revised increase of 3.8 per cent in November. That was due to a rebound in automotive shipments after the October shutdowns.
Statistics Canada said the December decline was mainly the result of lower sales in the petroleum, coal and food manufacturing sectors.
Economists at TD noted that the slide in December was not a surprise, as the November bounce hadn’t been expected to continue.
“Having said that, the [December] performance was still somewhat disappointing, with the value and volumes of shipments down a touch and nearly half of all industries reporting declines,” TD economist Michael Dolega said in a commentary.
Dolega said that in the wake of the soft December manufacturing report, TD has reduced its forecast for fourth-quarter gross domestic product by about 0.2 percentage points to two per cent.