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Manufacturing Sales Analysis – November 2016

Quebec and Alberta drive Canadian manufacturing to its best November on record

October's decline in manufacturing activity proved to be an exception to the general trend for the second half of 2016. Month-over-month sales rebounded strongly in November, rising by 1.5 per cent to reach $51.8 billion. Buoyed by strong gains in Quebec and Alberta, national sales have increased in five of the last six months and are now at their highest point since January. In fact, that $51.8 billion represents the highest level of manufacturing output ever posted for the month of November in Canada; it easily eclipses the previous high of $51.2 billion set in 2014.

Mfg sales in Canada

Thanks to this strong performance and the general turnaround since the summer, 2016 is shaping up into a reasonably solid year for Canadian manufacturing. Driven down by lower sales of petroleum products, fire-related supply disruptions in the Ft. McMurray area, and falling demand for machinery and metals products earlier in the year, it looked in August as if manufacturers would be lucky just to hold shipments steady at 2015 levels. Now, with only one month of data left to collect, Canada is on pace for about 0.6 per cent growth in manufacturing shipments for 2016. While that pace is not exactly scorching, it is far better than anyone expected six months ago.

mfg sales record month

Moreover, forward-looking indicators suggest that growth will continue into early 2017. New manufacturing orders were up in November for the third straight month, while inventory levels were down slightly. Meanwhile, surprisingly robust GDP, employment and export numbers reported in the past month could signal some strength finally returning to the Canadian economy and creating additional demand for domestic manufactured goods.

new non-aerosapce mfg orders

November's surge in manufacturing output was generally well-distributed across the sector. Of Canada's 11 largest manufacturing industries, seven recorded higher shipments that month and the only significant decline was in aerospace, where sales followed their typical pattern of wide swings from one month to the next.
Leading the way on the positive side, sales of primary metals jumped 9.1 per cent in November to lead all major industries. Wood product manufacturers also had another good month, with a 3.8 per cent increase in output compared to October. In fact, wood products industries have enjoyed an excellent year in general in 2016. Through November, sales are tracking more than 11 per cent higher than at the same period in 2015, while output levels are at their highest point in a decade. Other bright spots in November included petroleum refining, and sales of plastics and rubber products. Machinery production also appears to be regaining some strength after a dismal first half of the year.

mfg sales by industry

At the provincial level, November's manufacturing gains were led by strong growth in shipments from Quebec and Alberta. Sales from Quebec were up $357 million compared to October - an increase of 3.0 per cent. Manufacturing activity in that province remains below levels seen 13-14 months ago, but it has been aggressively recovering that lost ground. In Alberta, meanwhile, manufacturing sales growth in November was both surprisingly strong and surprisingly broad-based. Provincial sales were up 3.9 per cent ($205 million), with solid gains in food products, chemicals, non-metallic minerals and a long list of other industries.

mfg sales by province

Although Quebec and Alberta led the way, November was a solid month for manufacturing all across Canada. Nine of ten provinces recorded positive manufacturing sales growth, and most of those saw very strong growth numbers. The only areas of weakness were in Ontario, where sales were essentially flat compared to October, and in New Brunswick where output fell by 2.4 per cent.

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