Tuesday, November 15, 2011

Canadian Manufacturing -- doing well again

Canada's manufacturing sales headlines were good again this month.  -- the third increase in so many months.  Source of growth was first oil and coal (+13.7%), followed by transportation equipment (+7.1%) which includes aerospace (+17%) -- a very volatile sector and motor vehicle (+6.2%) which is much more stable.  In fact, several vehicle manufacturing plants are now operating either at or near full capacity (restricting the scope for growth in that sector).  So the bottom line is not so good.  On a geographical basis the two biggest winners were Alberta (oil) and Quebec (Aerospace).

Manufacturing Sales
(Yes it includes Oil & Coal)

 Manufacturing sales rise in September for a third consecutive month

 Inventories are rising in machinery (while sales are flat) and aerospace (sales are rising), but more importantly, the overall ration of Inventories/Sales is going down.  So the rise in inventory is a response to increase in sales.

Inventories are Rising

 Inventory levels up for the 12th straight month

Inventory to Sales are Falling

 The inventory-to-sales ratio declines

The news is "goodish" but not great, so while Ontario did ok this month, the reality that its car plants are now operating at near full capacity which means that there is little scope for improvement... this could be trouble.  Canada's reality in the auto sector is that it is entirely driven by the U.S. market -- where consumption has been on a tear -- in fact consumption is rising faster than income, so Americans are raiding their savings to fund consumption, this can only go for so long.

(source:  All diagrams are from StatsCan)

 

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