Wednesday, March 27, 2013

What does Canadian manufacturing say?

Canadian manufacturing has been in a funk for the past 4 months (well at least till January 2013).  The numbers are just not that great.

Sales are off both in 2002 dollars and actual dollars

Canadian manufacturing has been depressed; and its across the board although transport equipment sales were off their game (we are talking aerospace here -- Bombardier).  Canada is a small economy and aircraft sales are lumpy, sale in the aerospace sector were off 20% between December and January -- normal variation, still overall sales are way off.

Inventories are rising too

On a geographical basis Ontario and Quebec were the worse hit; Quebec obviously is the Aerospace sector (although they have an important presence in Ontario) but the Ontario has seen steep decline in vehicle sales.  Rumors of "channel stuffing" abound in the car sector (see here).  From vast Audi depot  to the same story for American made vehicle; then again, wages are stagnant in the US, and Median wages are falling -- average wages are stable because wage of the top 5% are rising rapidley -- I will not even discuss the top 1% that has seen a year on year increase for the past decade of more than 10% per annum in wage growth (we exclude here revenue growth).

Canada is an open economy; as such it acts as a litmus test for the health of the global economy -- there is very few lies in the statistical output of Canada (unlike China where stats are managed).  This could be a sign.  US corporations have been showing depressed earnings in the last quarter of 2012.  Rumours about Q1/13 are not good (thanks to twitter).  

Bottom line, Canada's economy is not growing strongly, the Canadian minister of finance (in his recent annual budget) indicated that expected GDP growth in 2013 is 1.8% -- it could be even lower.  In reality, Canada is dependent on US GDP growth (as our largest market).  Only time will tell but the signs are not positive...


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