Canadian Factory Sales Climb By Record 20.7% in June - Statistics Canada

Canadian Factory Sales Climb By Record 20.7% in June - Statistics CanadaOTTAWA--Canadian manufacturing sales surged in June, posting a record performance, as factories revved up production following a pandemic-induced plunge.

Still, shipments remain well below pre-pandemic levels, and the outlook is clouded by a slowdown in the U.S.--Canada's biggest export market--as some jurisdictions grapple with a rise in confirmed cases of Covid-19.

Manufacturing sales rose 20.7% in June from the previous month to a seasonally adjusted 48.74 billion Canadian dollars ($36.88 billion), Statistics Canada said Friday. Market expectations were for a 16.4% advance, according to economists at Desjardins Securities.

👉  June's performance follows a revised 11.6% jump in the previous month.

👉  In volume, or price-adjusted, terms, sales climbed 18.4% in June.

Canadian Factory Sales Climb By Record 20.7% in June - Statistics Canada

Despite the stellar June numbers, factory sales remain roughly 13% below pre-pandemic levels in February. Further, manufacturing sales sit at a nearly seven-year low.

Capacity utilization, or the ratio of the manufacturing sector's output to its estimated potential output, rose sharply to 73.3%. However, that remains eight percentage points below the year-ago level.

"This is far from a full recovery," said Andrew Grantham, an economist at CIBC Capital Markets, of the June factory data. "The recovery in manufacturing sales will likely be much more gradual from here, particularly given signs of a stall in the U.S. as Covid-19 case counts have risen again."

Three-quarters of all Canadian exports are U.S.-bound. Boston Fed President Eric Rosengren said this week a recent slowdown in U.S. economic activity is likely to persist because of difficulties states have encountered in suppressing the coronavirus pandemic.

Canada's manufacturing report said the auto sector accounted for more than half of the sales gain in June. Excluding motor vehicles and auto parts, sales climbed by 10.3% in June. All sectors tracked recorded month-over-month gains.

For the quarter ended June 30, the data agency said factory sales plunged by a record 22.8%, with the value of sales at its lowest level since the third quarter of 2009. In volume terms, shipments fell 20.5%.

The data agency estimated, based on a survey of factory owners, that capital spending in the manufacturing sector would decline 18.5% this year compared to 2020. The sharp drop "may impact manufacturing capacity in the future, as well as demand for machinery and equipment," Statistics Canada said.

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