Canadian factory sales rose to the highest in more than five years in March, led by gains in machinery and food, as a weaker currency makes manufacturing exports more competitive.
Sales climbed 0.4 percent to C$50.9 billion ($46.8 billion), the sixth gain in seven months, Statistics Canada said today in Ottawa. Economists forecast a 0.3 percent decrease according to the median of a Bloomberg survey with 15 responses.
Factory sales are gathering momentum as they approach the pre-recession peak set in August 2008, helped by a weaker Canadian dollar and improved demand in the U.S., destination of about three quarters of the nation’s exports. The American economy will expand 2.5 percent and 3.1 percent over the next two years, from 1.9 percent last year, according to median forecasts in a Bloomberg News survey.
“The manufacturing sector should begin to provide a cyclical lift” to exports, said David Tulk, chief Canada macro strategist in Toronto at Toronto-Dominion Bank’s TD Securities unit. “This expectation will need to be combined with considerable patience.”
Bank of Canada Governor Stephen Poloz has said a shift to exports and business investment from indebted consumers is key to erasing slack in the world’s 11th largest economy over the next two years.
Canada’s dollar strengthened 0.1 percent to C$1.0876 per U.S. dollar at 9:58 a.m. in Toronto. It has depreciated 4 percent over the past six months, the worst performer among 16 major currencies tracked by Bloomberg. Government bond yields declined, with the security due in five years falling 3 basis points to 1.53 percent, the lowest since Feb. 3.
Machinery sales rose 3.3 percent to C$3.07 billion in March, and food receipts gained 2.1 percent to C$7.80 billion, Statistics Canada said. Sales rose in 11 of 21 categories the agency tracks, accounting for around two-thirds of production.
The total gain was curbed by a 3.8 percent decline at paper manufacturers to C$1.98 billion, with some companies reporting difficulties during a strike at the port in Vancouver, Statistics Canada said. Paper inventories also rose 4.9 percent that month.
Total manufacturing inventories rose 0.2 percent to C$71.6 billion, leaving the ratio of sales to inventories unchanged at 1.41 in March.
Excluding price changes, a better indicator of the industry’s contribution to economic growth, factory sales rose 0.5 percent.
New orders “returned to normal” in March with a 19.9 percent decline following a 17.6 percent jump in February, Statistics Canada said. Last month, the agency said the transport category led the biggest gains in unfilled and new orders in records going back to 1992.
Unfilled orders fell 0.8 percent in March to C$89.4 billion after February’s 15.4 percent rise.