The Japanese tsunami dragged down Canadian manufacturing sales in April and home sales dipped in May, reports on Wednesday showed, offering further evidence the economy hit a soft patch in the second quarter.
Manufacturing sales slipped 1.3 percent in value in April, as expected, as the Japanese disaster cut off supplies to the auto industry, Statistics Canada said.
Markets had already priced in a weaker reading as recent signs pointed to a period of sluggishness after the economy grew by a healthy 3.9 percent clip in the first quarter. The housing market is also showing signs of cooling. Sales of existing homes in May dipped 0.6 percent from April, the Canadian Real Estate Association said, but were up 2.7 percent from a year earlier.
As well as dropping in value terms, factory sales volumes fell by 1.8 percent in April and this was the key data point, analysts said. They said it proves the sector has been a drag on the economy in the second quarter and signals that the Bank of Canada will be in no rush to raise interest rates to slow things down further.
"Today's weak print provides a cautious reminder that the pace of economic growth is slowing in Canada," said Mazen Issa, a strategist at TD Securities. Most primary dealers in a May 31 Reuters poll forecast the next rate hike would come in September.
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