Manufacturing in Canada Sags, Triggers Chilling References to Financial Crisis
It’s also happening in the US, but it’s much worse in Canada.
In the US, May industrial production dropped “unexpectedly,” as it was roundly called on Monday, by 0.2%, according to the Federal Reserve. The index value has now dropped from month to month since December, except in March when it was unchanged. The Empire State Manufacturing Survey, also released on Monday, confirmed this sort of scenario, ending up in the negative (-2.0) for the second time in three months.
But in Canada, manufacturing is getting hit hard – and not just because of the oil bust, though it plays a big role. Originally the hope was that a lower Canadian dollar would boost manufacturing through increased exports. The loonie dropped 17% against the US dollar from January 2014 through mid-March 2015, though it has ticked up a smidgen since. But the theory didn’t work out.
Manufacturing sales fell 2.1% to C$49.8 billion in April, seasonally and inflation adjusted, Statistics Canada reported today. The index can be jumpy from month to month. For example, sales of food dropped 5.7% in April, the largest monthly drop since August 2013, after rising 3.4% in March. But the problem isn’t limited to one month. Sales are now down 7.3% from July 2014, the largest and steepest such decline since the Financial Crisis. This is what this trend looks like:
The biggest culprits in April were food (-5.7%), aerospace products and parts (-17.8%), petroleum and coal products (-2.7%), motor vehicles (-2.5%), and machinery (-2.7%). Of note, sales of machinery for the mining and oil & gas sectors plunged 30% year over year.
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