Alberta manufacturing sales of $6.3 billion grew by 5.2 per cent in January, according to new data released Tuesday by Statistics Canada.
Manufacturing sales rose following two months of declines. Sales rose in 13 of 21 industries, led by the food and machinery industries, explained the federal agency.
However, on an annual basis sales were flat in the province.
In its daily economic update The Owl, ATB Financial’s Economics & Research Team, said of Alberta’s three largest manufacturing subsectors, food processing posted the largest monthly gain in January at 10.7 per cent. Petroleum refinery sales were up slightly (+0.9 per cent) while chemical manufacturing sales contracted by 2.2 per cent.
“We won’t start to see what the impact of COVID-19 (coronavirus) and the oil price war will be on Alberta’s manufacturing sector until we get data for February and March. Going forward, lower oil prices will push down the value of sales from Alberta’s petroleum refineries,” said ATB.
“We will also likely see reduced demand for some products as the economy slows domestically and around the world. Virus containment efforts might also cut into the availability of workers and, in turn, dampen output to some degree.”
Nationally, manufacturing sales were down 0.2 per cent to $56.1 billion in January, the fifth consecutive monthly decline. Sales decreased in nine of 21 industries, led by lower sales in the transportation equipment and petroleum and coal products industries. The food industry posted the largest gain.
“Sales in the petroleum and coal product industry fell 5.2 per cent to $5.9 billion, following a 1.9 per cent increase in December. The decrease in January reflected lower sales volumes and lower prices, as prices for the industry were down 2.6 per cent according to the Industrial Product Price Index. Partial shutdowns at some Canadian refineries for maintenance work during the month were a major contributor to the decline in volumes sold (-3.3 per cent),” said StatsCan.
It said inventory levels increased 0.4 per cent to $87.5 billion in January, following a 0.6 per cent decline in December. Inventories were up in 12 of 21 industries, led by the machinery (+5.1 per cent) and transportation equipment (+1.5 per cent) industries. These increases were partly offset by declines in the primary metal (-2.6 per cent) and petroleum and coal products (-3.2 per cent) industries.
The inventory-to-sales ratio increased from 1.55 in December to 1.56 in January. This ratio measures the time, in months, that would be required to exhaust inventories if sales were to remain at their current level, added the federal agency.
“With five consecutive months of shipment declines now on the books, this is a disappointing release which paints a picture of weak underlying momentum in the Canadian economy heading into the COVID-19 outbreak,” said Omar Abdelrahman, Economist with TD Economics.
“Manufacturing and export-oriented sectors will take a hit globally and in Canada. Providing some temporary respite is Canada’s disproportionate exposure to the U.S. market, which has so far seen fewer factory-related disruptions than elsewhere. All that said, we are operating under the assumption that activity will start recovering in the middle of Q2 as containment measures work to ease the spread of the outbreak. Of course, much remains uncertain at this point.”
