Skip to main content

Troubling data on the Canadian manufacturing segment

The problem with data is lag, let’s say that Canadian manufacturing companies believe that the CAD is going to stay at the 1.05/95 level, it changes their pricing perspective both in Canada and abroad, but this expectation as to interest rate takes time to be absorbed. The same also applies to exogenous events – such as the Japanese Tsunami of a few months ago.


(source: StatsCan)
April 2011 saw a 1.3% reduction in manufacturing sales, by no means “end of the world” and to a certain extent represents a walk back of the previous month’s increase, so conclusions are hard to draw, especially when one sector is responsible for the bulk of the pull back: namely transport. In the case of April the shortfall is not only Aerospace (11.6%) but also automobiles (8.6%) and parts (5.4%) that are to blame for the drop off. Energy manufacturing was also to blame but marginally (2.3%), while food 1.8%, machinery 3.2% and chemical 1.7% added to the positive side of the equation.

Far more serious is the rise of inventories and the inventory to sales ratio (never a good thing) while surprisingly order books we also rising (especially if aerospace is removed). So while the strong CAD (which by the way is now back to near parity – thanks to weaker oil prices – WTI near $94 this AM). It remains that the segment is going through a difficult phase – and this despite a very accommodative monetary policy.

Adding to this situation wholesale trade was also lower this month.

(source: StatsCan)


This may explain why the BoC is hesitating in moving more aggressively towards higher interest rates, they see some weakness in the manufacturing sector (although it accounts for less than 30% of GDP today Vs around 40% a decade ago). Overall the market is now discounting any BoC interest rate increase for 2011 – and Q1/12 is looking tight. Of course this could all change quickly, but market suspicions are that the BoC is very concerned with the international situation, and takes the view that raising rates now to reduced them in two months would send a worse signal than being “overly cautions”.


One reality that has been of concern of the BoC has been the weakness – and over leverage of the European banks especially with regards to the Greek and Portuguese bond exposure.

(Source: Early Warning)

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b)...
Post a Comment
Read more

Spray painting Taylor Swift G650 aircraft (updated)

 First, a bit of paint will not harm anyone.  These climate activities are going to learn two things in the next few days:  (1) Trespassing at an airport is a felony almost anywhere in the world.  That means criminal prosecution.   (2) removing paint from an aircraft is expensive.   So these climate activists are about to find out the reach of the British criminal system and it will not be pleasant, the UK has very strict laws about that, I would be surprised if cleaning the aircraft of all the paint will cost less than $100,000.     I am sure that when they planned (premeditation) this little show they had a very valid logic to doing this.  Tonight, they are probably realizing the depth of their troubles.   I understand that in the UK it's a minimum one-year jail sentence.    Also, good luck travelling with a criminal trespass charge against you.  I am relatively certain that the airline industry will ...
Post a Comment
Read more

Janet Yellen from China supporter to Hawk...

There is rarely serious news in the world these days, it seems that most newspapers are filled with headlines and little else, and then Ms Yellen went to China.  Secretary Yellen has long been known in the Biden administration as the voice of moderation when dealing with China, yet as her trip which concluded yesterday a hawk was born:  She warned the Chinese against dumping goods in the United States.    fighting words! The American administration is very concerned about the lack of Chinese domestic consumption.   Even before the COVID-19 epidemic, there were already the beginning signs of a slowdown, automobile sales were off.   China is facing domestic deflation (a clear sign of collapsing demand) China imports few consumer goods, they import raw materials and intermediary goods.   It seems that the American administration is concerned that the Chinese administration will dump consumer goods abroad to keep its manufacturing machinery ...
Post a Comment
Read more