Canadian manufacturing sales slipped 0.2 % in January after plunging an outsized 3.3% (previously reported as 3.1%) decline in December that marked the largest monthly drop since May 2009. Figures released this morning by Statistics Canada also say weakness in January sales was entirely concentrated in a sizable 3.8% drop in the transportation component, a result of a 19.7% drop in the volatile aerospace component along with a 3.7% decline in motor vehicle sales.
Monthly aerospace sales are often lumpy and say little about the underlying trend in production while early indications point to a rebound in auto production in February after sizable declines in both January and December. Outside of the transportation sector, sales actually rose a respectable 0.5%, although this still only partially retraced a 2.0% decline in December. The gain excluding the transportation sector reflected relatively broadly-based growth offset only partially by a 1.8% drop in the petroleum and coal component.
The volume of manufacturing sales fell 0.4%, building on a downwardly revised 3.9% decline (previously -3.8%) in December. In contrast to weakness in sales, inventories rebounded 1.7% in January following 1.5% and 0.6% declines in December and November, respectively.
In a separate report out this morning, wholesale sales rose 0.3% in January following a 1.1% drop (previously reported as -0.9%) in December. Much of the gain in January reflected sizeable 3.2% and 8.0% gains in sales in the machinery and equipment and computer and communications equipment subcomponents, respectively. Partial offset was provided by a 2.8% decline in wholesale sales of motor vehicles and parts. The volume of wholesale sales rose 0.5% following a 1.1% drop in December.
Despite the decline in overall manufacturing sales volumes, the details of the report point to the sector providing a respectable support to Gross Domestic Product growth in January. In part, this is because the gain in the volume of manufacturing sales in January was despite a sizable drop in the often volatile aerospace sector. Monthly aerospace sales typically have limited implications for monthly GDP growth since production associated with sales in the sector are normally spread over a number of months
