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The global oil glut has prices spiraling down to $35 a barrel recently, hammering sites such as the Syncrude oil sands in Fort McMurray, Canada and undercutting growth in Canadian manufacturing.

Canadian Manufacturing Sales Slip in October on Low Oil Prices

Dec. 15, 2015
Manufacturing sales in Canada fell 1.1% to $50.4 billion in October and new orders were also down by 1.4%.

Manufacturing sales in Canada declined for the third consecutive month in October as the global oil glut continues to dampen industry production and revenue, Statistics Canada reported today.

Manufacturing sales fell 1.1% to $50.4 billion in October from $51.1 billion in September. Sales declines were broadly based, occurring in 13 of 21 industries. In constant dollar terms, the government reported, sales were down 1.0%, indicating that lower volumes of manufactured goods were sold.

The petroleum and coal products industry suffered its fifth consecutive decline, with sales off 5.7% to $4.5 billion. Refinery volumes were lower, and maintenance and turnaround work at refineries was more extensive than usual, the government stated. As a result, sales fell to their lowest level since April 2009.

Production in the aerospace product and parts industry fell 10.3% to $1.6 billion. While aerospace production is more volatile than manufacturing as a whole, the government noted, sales have fallen 7.2% for the three-month period ending in October compared to the previous three months.

Machinery sales also fell in October, dropping 4.6% to $2.8 billion. The decline was led by the commercial and service machinery manufacturing sub-industry, which produces cash registers, photographic equipment, vending machines and simulation equipment. Sales in the sub-industry tend to fluctuate on the basis of the completion of large projects, Statistics Canada noted.

Sales also declined in October in the primary metal (-2.4%) and the miscellaneous (-6.6%) industries.

Motor vehicles were the bright spot in the October report, with sales up 4.9% to $5.3 billion. This was the fifth increase in six months. For the first 10 months of 2015, sales in the industry were 7.4% higher compared to the January-to-October period in 2014.

“The energy sector's correction continues to weigh on manufacturing sales,” commented Bill Adams, senior international economist at PNC Financial Services Group. “The broad-based weakness of Canadian manufacturing in October increases the risk that Canadian growth in the fourth quarter of 2015 undershoots the Bank of Canada's forecast for continued moderate expansion. Combined with the very low global level of oil prices, the possibility of additional Bank of Canada easing in 2016 is higher than it seemed a month ago.”

New orders fell 1.4% in October, the third monthly decline in a row. New orders were down in the transportation equipment, petroleum and coal product and primary metal industries, the government stated.

Despite the weak manufacturing production report, the government on December 4 reported that manufacturing employment increased in November by 17,000. Employment in the sector had been largely flat up until then.

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