Manufacturing sales up 0.9 per cent in August, surpassing expectations

OTTAWA — Canadian manufacturing sales were better than expected in August, boosting expectations for a rebound in the economy in the third quarter.

Statistics Canada said Tuesday that manufacturing sales increased 0.9 per cent to $51.1 billion in August, fuelled by higher sales of food, primary metal, and petroleum and coal products.

Economists had expected a gain of 0.3 per cent, according to Thomson Reuters.

TD Bank economist Dina Ignjatovic said manufacturing sales are moving in the right direction and closing in on the highs reached at the start of the year.

"This uptrend is expected to continue, with the recent pickup in U.S. consumption likely to translate into increased demand for Canadian-made goods," Ignjatovic wrote in a note to clients.

"The strong handoff from June, combined with the gains in July and August, suggest that manufacturing will be a key contributor to growth in the third quarter, which is currently tracking above three per cent."

The manufacturing report came one day ahead of a rate announcement by the Bank of Canada and the release of the central bank's fall monetary policy report which will include an updated economic forecast.

The Bank of Canada is expected to keep its key interest rate on hold at 0.5 per cent, but economists and policy-makers will scrutinize the central bank's outlook for the economy.

Earlier this month, the Bank of Canada senior deputy governor Carolyn Wilkins noted that there's still uncertainty around the rebound of the country's non-resource export sectors.

Paul Ashworth, chief North America economist at Capital Economics, noted that manufacturing sales and non-energy exports have been pretty disappointing over the past 18 months, particularly when factoring in the decline in the Canadian dollar in 2014 and 2015.

"U.S. economic growth does appear to be accelerating again in the second half of this year, but it remains to be seen whether Canadian manufacturers can exploit that stronger demand, particularly when they are competing against Mexican producers who also have the advantage of a further large currency depreciation this year," Ashworth wrote in a report.

Statistics Canada said Tuesday manufacturing sales grew 1.2 per cent on a constant-dollar basis, reflecting an increase in the higher volume of goods sold.

Sales were up in 15 of 21 industries, representing 69 per cent of the total manufacturing sector.

Food industry sales rose 1.7 per cent to a record high of $8.6 billion, while the primary metal industry gained 3.6 per cent to $3.9 billion.

Petroleum and coal product sales were up 2.5 per cent to $4.4 billion.

The transportation equipment industry saw sales fall 1.1 per cent to $10.5 billion.