Even though sales took a break in August, manufactured goods in Alberta are expected to perform strongly for the rest of 2018

Mario ToneguzziManufacturing sales in Alberta fell 0.8 per cent in August to $6.6 billion, following three consecutive monthly increases.

Statistics Canada said on Wednesday that most of the decrease stemmed from lower sales in the petroleum and coal products (-3.5 per cent), electrical equipment, appliance and component (-24.6 per cent) and primary metal (-9.2 per cent) industries.

But sales were 12.4 per cent higher in August than in August 2017.

Nationally, manufacturing sales fell 0.4 per cent to $58.6 billion in August, following three consecutive monthly increases. The decline was mainly due to lower motor vehicle sales. Excluding this industry, manufacturing sales rose 0.4 per cent in August, said StatsCan.

Sales were down in seven of 21 industries, representing 50.9 per cent of the Canadian manufacturing sector.

“Despite the monthly drop in sales, shipments are well above where they were 12 months ago (+12 per cent),” said ATB Financial’s Economics & Research Team, in a commentary about the Alberta numbers. “Stability in Alberta’s energy sector and higher production of petroleum products have largely driven growth in 2018. It’s not just energy related manufacturing that’s performing well. Most manufacturing sub-categories are in line with, or above, last year’s levels.

“Even though sales took a break in August, it’s likely that sales of manufactured goods in Alberta will perform strongly for the remainder of the year. The momentum is almost certain to flow into next year, as well. Alberta’s economy is recovering well and the latest trade deals have brought certainty to this and Alberta’s other export-related industries.”

Omar Abdelrahman, an economist with TD Economics, said the national data came in as expected with autos driving most of the decline.

“After the second quarter’s impressive performance and an unexpectedly strong July print, this shouldn’t be a cause for concern. On the flip side, excluding autos, today’s report paints a healthy picture of manufacturing growth, with 14 of 21 industries advancing and with the ex-auto sales print moving up 0.5 per cent,” he said.

“We continue to expect moderate growth going forward, but this week’s Business Outlook release adds some optimism to Canada’s manufacturing (and general business) outlook, with signs of increasing investment on the back of rising domestic and U.S. demand and growing capacity constraints.”

Josh Nye, senior economist with RBC Economic Research, said ongoing strength in the U.S. economy and a stable Canadian dollar should continue to support manufacturers.

“A significant reduction in trade uncertainty – at least within North America – will also help. But capacity constraints could represent a growing headwind. Capacity utilization in manufacturing is close to cycle highs but still below pre-recession norms. Job vacancies are elevated, and business surveys indicate skilled labour is hard to find.

“Reduced trade uncertainty, and perhaps some measures to encourage investment in the next federal budget, might spur capacity additions, but labour shortages will likely remain an issue. That could mean the manufacturing sector’s fastest growth is behind us for this cycle.”

Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.


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