Canada factory sales surge to economy on track

OTTAWA: Canadian manufacturing sales rose almost three times higher than expected in August and offered more evidence that the economy is on track for modest growth in the third quarter after a slump in the second.

A big jump in aerospace production outweighed a decline in auto sales to yield a 1.4 percent jump in overall factory sales in August from July, Statistics Canada said on Friday. The performance beat the market forecast of a 0.5 percent gain and was the second straight month of unexpectedly strong sales following three months of declines.

Sales totalled C$47.6 billion ($46.7 billion), the highest since October 2008.

August sales in constant dollars, used to calculate gross domestic product, rose 1.1 percent and shipments outside the auto sector were up 1.8 percent.

"We have no doubt that the economy fared much better in the third quarter," said David Madani, economist at Capital Economics. Gross domestic product contracted 0.4 percent in the second quarter on an annualized basis.

"Provided that business demand does not sour completely this quarter, then the economy is expected to end this year on a positive note, with a somewhat cheaper currency helping to buffer the blow from lower commodity prices to corporate profitability," Madani said in a note to clients.

The Canadian dollar pushed to a session high against the US dollar after the Canadian report and after data that showed US retail sales rose strongly in September.

The currency rose as high as C$1.0111 to the US dollar, or 98.90 US cents, from around C$1.0138, or 98.64 US cents, immediately before the reports.

Sales rose in 11 of 21 manufacturing industries representing 70 percent of total manufacturing.

The aerospace sector, which fluctuates more than other industries from month to month, registered growth of 47.8 percent and also influenced the overall figures for inventories, new orders and unfilled orders.

For aerospace and shipbuilding, Stats can measures production rather than final sales to get a more accurate picture of their economic impact on a monthly basis through the unusually long production period.

Sales of transportation equipment overall rose 7 percent, even though sales of motor vehicles and parts fell. The food and petroleum and coal products industry also registered increases, offset by declines in fabricated metal product and primary meals industries.

New orders in August climbed 0.8 percent, unfilled orders rose 1.3 percent to their highest level since April 2009 and inventories edged up 0.3 percent. The ratio of inventory to sales fell to 1.33 from 1.35.

Copyright Reuters, 2011