OTTAWA: Canadian factory sales rose in January onrobust car shipments, beating expectations and marking the latest in a series of positive readingson the nonresource side of the country’s economy, which has been hard hit by the commodity-price rout.
The value of factory sales rose 2.3% month-over-month to a record 53.13 billion Canadian dollars (about $39.76 billion), Statistics Canada said Wednesday. That was the third-straight increase in manufacturing sales, and well ahead of the 0.5% gain economists expected, according to Royal Bank of Canada. In volume terms, January factory sales rose 2.4% and hit a level last recorded before the global financial crisis in 2008.
Motor-vehiclesales reached their highest level inmore than 15 years. Even when auto-sector sales are excluded, manufacturing shipments increased 1.2%. “These are very, very encouraging numbers,” said Jimmy Jean, economist at Desjardins Capital Markets, adding this will give the Bank of Canada further reason to keep interest rates unchanged.
The results also highlight the buffer a lower Canadian dollar is providing to an economy struggling with lower commodity prices. “People have been overly pessimistic about the impact of Canadian dollar—but we are finally seeing the positives here,” Mr. Jean said.
On a year-over-year basis, factory sales rose 5.6%, or the fastest 12-month gain since December 2014. Expectations for another positive factory-sales report in January grew after trade data indicated a 3.6% surge in export volumes—a sign Canada’s factory sector is gaining strength due to a weaker Canadian currency and robust U.S. demand.
Last week, the Bank of Canada left its benchmark rate unchanged at 0.5% and said nonenergy exports are gathering momentum, particularly in sectors that are sensitive to exchange-rate movements. The central bank warned, though, the economy still faces stiff headwinds as business investment remained “very weak” due to a retrenchment in the resource sector.
Among Group of Seven economies, Canada’s growth has slowed the most due to the commodity-price shock, given the importance of crude oil as a top export. Due to the swift drop in energy and metals prices, the Bank of Canada has said the economy is undergoing a “complex” adjustment that could take three to five years to play out. Meanwhile, the nonresource side of the economy, led by factories, are expected to drive growth.
