Canada’s factory sales rise more than expected in July

Canada’s factories have reported better-than-expected sales to start the third quarter – fuelled by gains in the auto sector – in another signal that the Canadian economy is sputtering back to life.

Sales of motor vehicle parts rose 12.1 per cent to $2.6 billion in July.

Economists had expected an increase of 1.0 per cent, according to Thomson Reuters. Economists closely track volumes to gauge the level of economic activity.

The July total remains below a peak of $53.7 billion set in July 2014, and Bank of Canada policy makers said earlier this year the sluggish recovery in non-energy exports was puzzling, given the depreciation in the currency and better growth in the US, the nation’s largest trading partner.

“The USA resurgence, coupled with a more competitive Canadian dollar, seems to be helping Canadian exporters of manufacturing goods”, National Bank economist Krishen Rangasamy said in a research note.

A leading worldwide economic watchdog has slashed its growth forecasts for Canada, even as the country’s resurgent manufacturers delivered fresh evidence that the economy has pulled out of its 2015 first-half skid. Among the G7 major industrialized countries, Canada’s forecast 2015 growth is in the middle of the pack, ahead of Japan (0.6 per cent), Italy (0.7 per cent) and France (1.0 per cent).

“This is great news in that it gives Bank of Canada some luxury with time” before it decides what to do next, Mr. Chandler said.

In July, sales of auto parts and motor vehicles accounted for two-thirds of the overall factory-sales increase.

Canadians sold C$4.24 billion of both U.S. and non-U.S. foreign equities, while purchases of foreign debt rose by C$4.0 billion as investors picked up U.S. Treasury bonds. The agency attributed the gain to shorter-than-anticipated shutdowns, largely for retooling, of vehicle assembly plants across the continent.

Foreign investors also sold C$3.9 billion of money-market paper and acquired C$3.50 billion of bonds.

Twelve of the 21 industries tracked saw sales improve for the month, representing 62.8 per cent of the manufacturing sector.

New orders climbed 10.2 percent on more orders in the aerospace industry.