Canada: Manufacturing activity is likely to remain somewhat depressed – CE

Data released on Monday showed a larger-than-expected decline in April in manufacturing sales in Canada. Stephen Brown, Senior Economist at Capital Economics points out the manufacturing sector is struggling due to supply shortages.

Key Quotes:

“Manufacturing sales volumes slumped 3.3% m/m in April, as the disruption from the global semiconductor shortage intensified. While sales volumes should gradually rise again from May, it will be some time before overall manufacturing activity returns to its pre-pandemic level.”

“The 2.1% m/m fall in manufacturing sales values in April was twice as bad as the preliminary estimate. The weakness was primarily due to the disruption from the global semiconductor shortage, with sales of motor vehicles plunging by 36% m/m and sales of parts falling by 19%. The shortages also help to explain the smaller declines in computer & electronic product and electrical equipment & appliance sales.”

“The upshot is that manufacturing activity is likely to remain somewhat depressed. Manufacturing sales volumes were 6.6% below their pre-pandemic level in April, although sales values have at least been supported by the strong gains in commodity prices this year. In any case, with activity elsewhere in the economy set to recover strongly in the coming months as the coronavirus restrictions are eased, we continue to expect overall GDP to return to its pre-pandemic level by August or September.”