The Canadian Press - ONLINE EDITION

Manufacturing sales off 0.1%, but pick-up in volumes to add to GDP growth

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OTTAWA - Canada's key factory sector saw sales decline slightly in April, but a 0.4 per cent increase in volume output took the sting out of the unexpectedly soft performance Friday.

Especially encouraging was a 3.3 per cent increase in the auto industry, which will provide a boost to Ontario's underperforming economy.

As well, the pipeline continued to hold promise for future sales as new orders rose 2.5 per cent and unfilled orders rising 0.5 per cent continuing the strong trend in recent months.

"From the (volume) point of view, the report is fairly respectable," said Jimmy Jean, an analyst with Desjardins Capital Markets, noting that decline was all due to a price drop.

"Assuming the pace of March and April was kept in May and June, we'd find real manufacturing sales up a whopping 5.1 per cent, flatly the strongest quarter in nearly three years."

TD Bank economist Randall Bartlett pointed out that manufacturing sales are up 5.7 per cent over the past 12 months, the strongest year-over-year growth since June 2012.

While the headline manufacturing number from Statistics Canada includes price fluctuations, analysts point out that it is the volume of sales that goes into the gross domestic product calculation, hence the April result will contribute positively to second-quarter economic growth.

In all, 14 of 21 industries representing about 60 per cent of manufacturing posted gains as net sales slipped slightly to $50.9 billion after three consecutive increases.

The main weakness came in the petroleum and coal product industries, which fell by five per cent, as well as aerospace, which gave back 6.2 per cent of the strong gains the sector made in the previous few months. Machinery industries also dipped by 3.2 per cent.

Aside from auto, the paper industry posted an impressive 12.1 per cent gain in April, and food manufacturing continued its four-month run edging up 0.5 per cent.

Regionally, provinces were split between gainers and losers, with most of the losses coming in Quebec and the Atlantic provinces.

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