Canadian economic growth in third quarter may lag behind forecast
forecast given the latest data on declining manufacturing sales, says one economist.
“We continue to expect a weak third quarter, with growth well below the Bank of Canada's one percent forecast,” Alexandra Brown, North America economist at Capital Economics Ltd., said in a note.
Manufacturing sales fell one percent in August.
according to Statistics Canada
was released Wednesday, though it beat forecasts for a 1.5 percent drop. Their cost decreased by 1.5 percent over the month.
Manufacturing sales fell in 12 of 21 sub-sectors, with sales in the transportation sector down the most, down 5.7% from July, and the food sector down 1.9%.
In the transportation sector, sales of aerospace parts fell the most, down 8.6%, after rising 6.9% in July, a record monthly increase. Statistics Canada said the auto sector recorded “lower-than-normal seasonal sales” of parts and vehicles, which fell 5.2 per cent and 3.3 per cent, respectively, as production slowdowns hit factories in Ontario.
“Market uncertainty and tariffs imposed by the United States also contributed to disruptions to production schedules at some assembly plants,” the agency said.
Canada's auto sector is still struggling
25 percent tariffs on auto parts
which do not correspond
Canada-United States-Mexico Agreement
and vehicles built entirely in Canada.
But Brown said August manufacturing data was better than economists had expected, providing some support for a recovery in industrial sales in June and July, when they rose 0.3% and 2.3%, respectively.
However, not everything was so rosy.
“Available data points to a weak September,” he said, noting that new orders fell 2.2 percent in August and slowed to their lowest level in a year, while the S&P Global Inc. manufacturing purchasing managers' index (PMI). remained in “recession territory” in September.
The PMI fell to 47 from 51 in February as the threat posed by US tariffs to the Canadian economy intensified. A PMI reading below 50, an indicator of market conditions developed by the Institute for Supply Management, indicates things are slowing, while a reading above means they are growing.
Brown said wholesale sales excluding oil fell 1.3 per cent month over month in August, contradicting short-term data from Statistics Canada.
gross domestic product (GDP) estimate
in August it said wholesale sales would rise.
Canada's auto manufacturing outlook took another blow Wednesday when Stellantis NV said it was moving production of Jeep SUVs to the U.S. from Ontario, casting doubt on the future of its Brampton plant and 3,000 jobs.
“The news that Stellantis is moving production of its latest Jeep models to the US highlights the challenges facing the sector and suggests limited growth potential going forward,” Brown said.
In a bright spot, aluminum sales rose 45.1% month-on-month in August, while sales in the primary metals sector rose 3.6%.
The aluminum industry is among the sectors hardest hit by Donald Trump's tariffs and faces a 50 percent levy.
At the end of September, Capital Economics forecast that third-quarter GDP would be 0.8% annualized.
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