In January 2016, Canadian manufacturing shipments increased by 2.3% month-over-month to a record $53.1 billion, driven largely by motor vehicle and parts sales. While petroleum and coal manufacturing continued to decline, overall manufacturing sales, excluding this sector, saw a more impressive rise of 3.1%. The report indicates optimism for sustained growth in Canadian manufacturing, particularly in Ontario and Quebec, despite continued weaknesses in Alberta and Saskatchewan's oil sectors.

1. Canadian Manufacturing
Trends – January 2016
By: Paul Young, CPA, CGA

2. Disclaimer
• This presentation is one opinion on manufacturing sales for Canada

3. Paul Young - Presenter
Bio
• CPA/CGA
• 25 years of experience in Academia, Industry and Financial solutions
• Youtube Channel -
https://www.youtube.com/channel/UCAArky1bAXPSuV2NLtUnyLg

4. Agenda
• Summary
• Sales by sector
• Sales by provinces
• Key quotes
• Risks

5. Summary:
• The value of Canadian manufacturing shipments surged 2.3% m/m in January to a record $53.1 billion, well
ahead of the 0.5% m/m consensus call. Constant dollar sales rose 2.4% m/m to their highest value since July
2008, highlighting that the volume of goods sold is returning to their pre-recession highs.
• The strong headline number was largely driven by higher sales of motor vehicles & parts. These increased by
9.6% m/m to $6.6 billion to the highest level since the late 2000 as shipments of higher-end, costlier models
and the lower value of the Canadian dollar boosted shipments. Food products also had a solid month rising
by 4.6% to $8.4 billion.
• Petroleum & coal manufacturing shipments continued to fall, declining 5.9% m/m in January to the lowest
nominal value since August 2004. Most of this is a price story, with the volume of refined petroleum product
shipments holding up much better.
• After ending 2015 on a softer note unfilled orders rebounded, climbing 0.4% m/m to $91.8 billion to a
comfortable all-time high. A rise in aerospace product and parts orders led the rise in unfilled orders.
Inventories climbed 0.6% m/m, primarily the result of aerospace products and parts. Despite this, the
inventory-to-sales ratio continued to fall, reaching 1.36 in January, the lowest value since December 2014.
• Ontario and Quebec led provincial increases, but six other provinces managed increases. Sales in Ontario
increased a whopping 3.9% m/m to $26.4 billion as strength in motor vehicle and parts industries boosted
the provincial numbers. Manufactured food sales jumped 6.9% m/m as well in the province. Gains in Quebec
were helped by a rise in fabricated metals (11.2%) and machinery (7.4%) manufacturing.
• Petroleum & coal manufacturing continues to weigh on Alberta's sales. The continued decline in the value of
refined petroleum products has led to the sector becoming the third largest manufacturing industry in the
province, falling behind food product manufacturing in September 2015, and now even chemicals in January
2016.

6. Implications
• This was a strong report, with the underlying reading somewhat stronger than suggested by the
headline print which was weighed by prices of petroleum & coal product. Excluding petroleum &
coal products, manufacturing sales rose an even more impressive 3.1% m/m, the third
consecutive monthly increase.
• We remain optimistic that much of these gains will be sustained in coming months as the past
declines in the loonie and robust U.S. domestic demand continues to support Canadian
shipments. We expect that most of the upside remains to be seen across Ontario, Quebec and
B.C., but other provinces should share in the spoils also. It is important to note that motor vehicle
• plants in Ontario that went offline mid-February are online this year. This will result in y/y
readings somewhat overestimating the underlying strength.
• On the other hand, we anticipate continued weakness across the major oil producing
jurisdictions, most notably Alberta and Saskatchewan, as oil sector related manufacturing
continues to suffer. As well, Alberta's recently announced a shift away from coal energy
generation that may weigh on coal manufacturing.

7. Sales by Provinces

8. Sales by major sector

9. Sales by Sector - Canada

10. Key quotes
• Sales rose in 16 of 21 industries, representing more than 80 per cent of the manufacturing sector.
Eight provinces recorded higher sales in January, led by Ontario and Quebec. The only provinces
to report lower sales were Alberta and Nova Scotia. (source:
http://www.canadianmanufacturing.com)
• Low Canadian Dollar boosts exports (www.bnn.ca)
• Canadian exports are starting to show signs of life, and factories are responding in kind,” wrote
CIBC economist Nick Exarhos in a report to clients. “The real gain in shipments also augurs for a
solid month in January GDP … [and] it suggests that growth will easily surpass the BoC’s Q1
growth target of 1 per cent.”
• Statistics Canada said motor vehicle sales reached their highest level in 15 years as they gained
9.6 per cent to total $6.6 billion. The agency attributed the increase to a trend in the industry
toward higher-end models and the lower value of the Canadian dollar. Sales of food climbed 4.6
per cent in January to $8.4 billion, while the motor vehicle parts industry gained 4.0 per cent at
$2.7 billion. (Winnipeg Free Press)

11. What’s next
• 2016-2017 Federal Budget and various provincial budget
• Approval of CETA as well as other FIPA/Trade Deals (TPP or India)
• Government policies (Carbon Pricing, Environmental Assessment)
• Low Currency
• Low growth rates (internationally)