Canada May Factory Sales Decline 0.4% On Refinery Shutdowns
07/17/2012| 08:52am US/Eastern
By Paul Vieira
OTTAWA--Canadian factory shipments declined in May, the fourth drop in five months, as refinery shutdowns weighed heavily on results and offset gains in the transportation sector, Statistics Canada said Tuesday.
The drop badly missed expectations for a gain in manufacturing sales.
Factory shipments fell 0.4% in May to 48.74 billion Canadian dollars (US$48.03 billion), coming on the heels of a steep 1.1% decline in April. The April factory data were revised downward, from the original estimate of a 0.8% drop.
Ahead of the data release, market expectations were for a rebound in May for Canadian manufacturing - with traders penciling in a 0.6% gain, according to economists at Royal Bank of Canada.
On a volume basis, manufacturing sales rose slightly in the month, 0.2%.
Canadian manufacturers face stiff headwinds in the coming months as financial turmoil in Europe, and slowing growth in emerging markets and the U.S., dampen global demand. The Canadian currency has so far remained close to par versus the U.S. dollar, as lower energy prices have been offset by traders rushing to park their cash holdings in triple A-rated Canadian debt.
The drop in May factory sales was triggered by a 9.6% fall in the petroleum and coal products sector. The decline, to C$6.40 billion, reflected temporary shutdowns at some refineries and lower commodity prices. The one-month fall in this sector was the biggest since December 2008, or at the height of the financial crisis, when petroleum and coal shipments plunged over 20%.
Excluding the petroleum and coal products sector, Canadian manufacturing sales rose 1.2% in the month, the data agency said.
Meanwhile, producers of transportation equipment posted an 8.1% gain in May, to C$9.06 billion, driven by a 65.8% surge in the volatile aerospace component. Sales of motor vehicles advanced 1.6% to C$4.60 billion, and auto parts gained 1.4% to C$2.04 billion.
Shipments declined in four of the 10 Canadian provinces, with manufacturing-heavy Ontario and resource-rich Alberta posting the largest declines in dollar terms.
Inventories rose 2.1% in May to C$66.01 billion, hitting their highest level in over three years. The surge was the result of a sharp increase, 29.5%, in petroleum and coal product inventories.
The inventory-to-sales ratio - which measures the time required, in months, to exhaust inventories if sales remained at the current levels - climbed to 1.35:1 in May from 1.32:1 in the previous month.
Unfilled orders rose 0.7% to C$63.14 billion, reflecting advances in the aerospace and fabricated metal products industries. New orders remained relatively unchanged, at C$49.19 billion, after a 2.6% decline in April.
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