Manufacturing sales in Canada fell 9.2 per cent to $50.8 billion in March, the lowest level since June 2016 and the largest percentage decline since December 2008, during the previous recession, said Statistics Canada in a report released on Thursday.
“Manufacturing sales in March were substantially affected by COVID-19 as many plants were shut down or faced sharply lower demand during the last two weeks of the month. Given ongoing lower demand, together with continued challenges to global supply chains and ongoing physical distancing measures, the March decline in sales is expected to continue into April,” said the federal agency.
Alberta sales fell by 6.6 per cent to $5.8 billion. That was also down 11.1 per cent from a year ago.
While the drop in March is large, it is not out of the ordinary in Alberta, said ATB Financial’s Research & Economics Team in its daily economic update The Owl.
“For example, total manufacturing sales fell by 7.7 per cent in June 2019, by 6.9 per cent in November 2018, and by 7.5 per cent in April 2018,” it said.
“All of this is to say that, while the COVID-19 pandemic’s negative impact on gas prices and overall demand for manufactured goods around the world explains much of the drop in March, this sort of volatility is not unusual in Alberta.
“Looking at the three largest manufacturing subsectors in Alberta, unadjusted year-over-year sales of food products improved by 17.3 per cent, petroleum and coal products declined by 39.1 per cent, and chemicals slipped by 1.8 per cent.”
Nationally, sales were down in 17 of 21 industries, led by steep declines in the transportation equipment and petroleum and coal product industries. In contrast, sales were up in food, paper, as well as the beverage and tobacco industries.
“Over three-quarters (78.3 per cent) of establishments in the manufacturing sector reported that their activities were impacted by COVID-19. Furniture and related product (91.2 per cent), miscellaneous (88.9 per cent) and transportation equipment (88.3 per cent) industries reported supply issues, with some shutting down several plants in response to lower global demand or in response to physical distancing requirements,” explained the federal agency.
“Over four-fifths (86.8 per cent) of firms in the printing and related support activities industry reported that COVID-19 had affected their activities, as they lost clients in the wake of the closure of restaurants, schools and sporting events. Paper (62.8 per cent) and food (61.8 per cent) manufacturers reported that COVID-19 had affected their activities. For both industries, higher consumer demand boosted overall sales in these industries during the month of March.”
Stats Can said sales declined for the third consecutive month in the petroleum and coal product industry, down by one-third (-32.2 per cent) to $3.9 billion in March.
“The drop in sales reflected lower prices and quantities, as refineries curtailed production in response to the world oil supply glut and falling demand as drivers stayed home in response to lockdown orders. Furthermore, many refineries have announced in the media that they will postpone their spring turnaround works as a result of the pandemic to avoid bringing in extra workers and contractors,” it said.
March’s decline came in largely as expected, with broad-based weakness across all major subsectors and provinces. Further pain is still expected in April, as the full impacts of mandated shutdowns and containment efforts appear in the data, said Omar Abdelrahman, Economist, with TD Economics.
“Indeed, Markit’s PMI release for Canada showed the sharpest decline in manufacturing sentiment since the survey began in 2010, and now sits well into contractionary territory (at 33). This was further reaffirmed in April’s employment report, which showed a 15.7 per cent (m/m) drop in manufacturing sector employment and a 23.9 per cent drop in hours worked,” he said.
“The easing of restrictions, both across provinces and globally, may provide a modest lift to domestic shipments and exports in May. However, the road to recovery in the sector remains cloudy.”
