Manufacturing sales fell 9.2% in March as factories closed due to the pandemic

OTTAWA — Canadian manufacturing sales posted their biggest percentage drop since the financial crisis in March and economists warned sales are expected to continue to fall in April as the COVID-19 pandemic brought the economy to a crawl.

Royal Bank senior economist Nathan Janzen said Thursday that the economic data will also likely get significantly worse in April with containment measures in place for the entire month.

“Beyond that, we could see some improvement in May already with social/distancing measures easing in spots, but the drop in activity in March and April is still likely to be staggering, and entirely unprecedented in modern measured economic data,” Janzen wrote in a brief note.

Statistics Canada reported Thursday manufacturing sales fell 9.2 per cent to $50.8 billion in March, the lowest level since June 2016, as factories shut down due to the COVID-19 pandemic or faced sharply lower demand.

The average estimate by economists was for a drop of 5.7 per cent, according to financial markets data firm Refinitiv.

In volumes terms, manufacturing sales fell 8.3 per cent.

Sales fell in 17 of 21 industries led by the transportation equipment industry which plunged 26.5 per cent in March as Canadian auto assembly plants and several parts suppliers in North America cut production. The motor vehicle subgroup saw sales fall 33.8 per cent, while motor vehicle parts dropped 31.6 per cent.

The petroleum and coal product industry group fell 32.2 per cent in March.

However, sales in food manufacturing sales rose 8.2 per cent, while paper manufacturing sales climbed 8.4 per cent as Canadians stocked up on groceries and toilet paper. Beverage and tobacco sales rose 6.7 per cent.

Excluding motor vehicles, parts and accessories, overall manufacturing sales were down 5.5 per cent.

TD Bank economist Omar Abdelrahman said the easing of restrictions will provide a modest lift in May, but “the road to recovery in the sector remains cloudy.”

“Most manufacturing activity is expected to see only a gradual ‘U-shaped’ recovery, as the weak global macroeconomic backdrop, heightened uncertainty, and lingering weakness in the energy sector continue to weigh on shipments,” Abdelrahman wrote. 

“Only a few manufacturing industries (food, chemical products) are expected to outperform or see a quick ‘V- shaped’ recovery.”

Regionally, manufacturing sales were down in eight provinces in March, led by Ontario which saw a 14.3 per cent drop and Quebec where sales fell 4.1 per cent.

Manitoba saw sales rise 8.2 per cent, boosted by food sales, while Nova Scotia reported a 2.9 per cent increase on higher sales in the transportation equipment and paper industries.

In a preliminary estimate for March released last month, Statistics Canada said the economy posted a nine per cent decline for the month as business came to a standstill due to measures taken to slow the spread of the pandemic.

Statistics Canada is expected to release its full report on how the economy fared in March on May 29 when it will also report its results for the first quarter of the year.

This report by The Canadian Press was first published May 14, 2020.

The Canadian Press