* Factory sales rise 1.0 pct vs estimate of 0.3 pct gain
* Wholesale trade flat in Nov from Oct
* Motor vehicle sector shows biggest gains in both reports
* November GDP growth seen at roughly 0.2 pct
By Louise Egan
OTTAWA, Jan 21 A revived auto sector boosted
Canada's manufacturing sales in November and helped prevent a
slide in wholesale trade, a trend that may continue into 2014 as
a weaker Canadian currency and strengthening U.S. economy spur
Factory sales jumped 1.0 percent to C$50.5 billion ($45.9
billion) in the month, the highest level in nearly two years and
approaching levels typically seen before the 2008-09 recession,
Statistics Canada data showed on Tuesday.
The gain was well above the expected 0.3 percent advance.
Analysts warned the numbers are not quite as rosy as they
appear at first glance. The volatile aerospace industry
accounted for much of the gain in factory sales, shooting up
21.3 percent. But that reflects production over several months
and will therefore not necessarily be reflected in November's
gross domestic product (GDP) figures.
"Recent gains in manufacturing sales are encouraging with
underlying conditions, including stronger growth in the U.S.
economy and a weaker Canadian dollar, still supportive for the
sector in the near term," Nathan Janzen, an economist at the
Royal Bank of Canada, said in a note to clients.
The Canadian dollar, which hit four-year low
overnight, firmed immediately after the reports. It later traded
at C$1.0976 to the greenback, or 91.11 U.S. cents, still weaker
than Monday's close of C$1.0951, or 91.32 U.S. cents.
But ignoring the outsized jump in aerospace sales and taking
into account the sluggish, 0.2 percent rise in inventory
accumulation, Janzen added: "this still points to little support
from the manufacturing sector in the November GDP report."
Still, manufacturing sales were up 0.7 percent in volume
terms. Motor vehicle sales, which are a more reliable gage of
the health of the manufacturing sector, increased by a hefty 5
percent, the highest since November 2007.
Statscan said the motor vehicle industry comprised nearly 10
percent of total manufacturing in November after falling to 4
percent during the 2008-09 recession.
The data comes one day before a hotly anticipated Bank of
Canada interest rate decision and argues against monetary-policy
easing, said Derek Holt, vice-president at Scotiabank Economics.
"The broad takeaway is that this adds further reason behind
why the BoC is likely to be highly reticent to engineer a rate
cut," he said.
The bank has kept its rate on hold since 2010. While no move
is expected on Wednesday, some analysts see a chance the bank
will sound more dovish in its statement.
Canada has long recovered from the effects of the global
financial crisis but its economy has had ups and downs since
then, with exports failing to fully recover and investment
The first sign of sustained strength came in the third
quarter of last year, with 2.7 percent annualized growth. The
fourth quarter could show slightly lower growth, analysts say.
The economy is now expected to have expanded by about 0.2
percent in November, down from 0.3 percent in each of the
previous two months.
Canadian wholesale trade was flat in November from October,
as a 2.5 percent jump in motor vehicle sales helped offset lower
sales in five subsectors representing 63 percent of total
Food and beverage sales rose by 1.4 percent and 2.7 percent,
Excluding the auto sector, sales declined 0.5 percent.
Mazen Issa, senior strategist at TD Securities, sees the
trend of strong auto sales continuing this year.
"The transport industry has been one of the few bright spots
in 2013 and will likely continue to benefit from improved U.S.
demand, though we look for other manufacturing-intensive
industries to pick up the slack," he said.