Canadian Manufacturing Sales (January 2023)

A Boost for the Canadian Manufacturing Industry in January 

• Manufacturing sales jumped 4.1% month-over-month (m/m) to $73.9 billion in January, above the 3.9% expected advance, after two consecutive months of declines. In real terms, sales were up 3.8% m/m indicating strong volumes, as opposed to prices, accounted for most of the gain. 
• Sales were led by the petroleum and coal products industry (+10.1% m/m to $10.3 billion), motor vehicles (+13.4% m/m to $4.8 billion), and food (+3.4% m/m to $12.4 billion). Manufacturing sales gains were broad based as 16 of 21 sectors notched increases over the month.
• A 14.3% m/m jump in Ontario's motor vehicle manufacturing sector drove the province's outsized gain of 5.2% m/m. Alberta's manufacturing sector also saw a healthy jump in sales (+11.5% m/m) after declining by the most of any province in the month prior. Newfoundland and Saskatchewan declined by -14.8% and -9.0%, respectively.
• Inventories ticked up for a second straight month by 0.3% m/m, led by higher inventories in machinery (+4.6%), primary metals (+3.0%), and food industries (+2.2%).  
• Unfilled Orders rose by 1.0% m/m in January. Following three months of consecutive decline, the value of new orders jumped 7.1% to $75.1 billion.  

Key Implications

• The Canadian manufacturing sector has started the year on strong footing after a sluggish end to 2022. The growth in manufacturing sales should continue into February as they continue to follow Canada's manufacturing PMI which, after flipping into expansionary territory in January, is signaling healthy momentum into the next month. 
• Stronger than expected manufacturing for the month of January should fuel some of the economic growth we expect in the first quarter of the year. Higher interest rates however, will continue to weigh on consumers, ultimately affecting the demand for manufactured goods – especially in the durables sector.

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