* Sales tumble 3.1 pct vs estimate of 0.8 pct decline
* Auto assembly plants decline 15.4 pct in month
* Factory sales in 2012 as a whole up 3.4 pct
By Louise Egan
OTTAWA, Feb 15 Canadian manufacturers ended 2012
on a dismal note, registering the biggest monthly decrease in
sales since the Great Recession, a drop that suggests growth
again disappointed in the fourth quarter.
Manufacturing sales fell 3.1 percent in December from
November, the sharpest decline since May 2009 in seasonally
adjusted terms, due mainly to weaker auto production but also to
lower sales in 16 of 21 industries, Statistics Canada said on
The news drove down the Canadian dollar and disappointed
investors, who expected a milder 0.8 percent decrease. Factory
sales rose 1.9 percent in November but struggled to gain
traction overall last year.
"You can't really paint a more negative picture of Canada's
manufacturing sector than what we saw with the December
shipments report," said Sal Guatieri, senior economist at BMO
Manufacturers have been hard hit by a strong Canadian dollar
and tepid U.S. demand for their products, and they have yet to
see sales climb back to pre-recession levels.
"The report clearly underscores that Canadian manufacturers
need U.S. consumers and businesses to ramp up their spending to
see some revival this year," said Guatieri.
Excluding the heavyweight auto sector, sales fell 1.8
percent, dragged down by chemicals, energy products and
In volume terms, overall sales sank 3.8 percent.
The Canadian dollar weakened by more than half a
cent to C$1.0065 versus the U.S. dollar, or 99.35 U.S. cents,
from C$1.0026, or 99.74 U.S. cents just before the data was
The December performance rounded off a mediocre year for
the sector, based mainly in the province Ontario. In 2012 as a
whole, factory sales rose 3.4 percent, less than half the 7.8
percent growth of 2011.
Economists scaled back their forecasts for December and
fourth-quarter economic growth after the report, which also lent
credibility to the Bank of Canada's message last month that
interest rate increases are less imminent.
Indeed, the central bank's forecast of 1 percent annualized
growth in the fourth quarter now looks high.
"Real GDP is expected to spend another quarter close to its
dismal 0.6 percent advance in Q3, which speaks to the
combination of persistent headwinds and negative shocks
that undercut growth around the world through the end of last
year," said David Tulk, chief macro strategist for Canada at TD
The International Monetary Fund predicted on Thursday that
Canada's growth rate would gradually speed up in 2013 as the
U.S. recovery gains momentum. But it warned that U.S. growth
alone would not be enough to close Canada's current account
deficit, as exporters will continue to grapple with a strong
currency, poor productivity and competition from China.
In December, sales by motor vehicle assembly plants
plummeted 15.4 percent. While that sector normally undergoes
temporary plant shutdowns in the final month of the year,
Statscan said the decline in December 2012 was greater than
New orders for manufactured goods fell 4.4 percent in
December while unfilled orders increased by 2.6 percent.
Inventories dropped 1 percent and the inventory-to-sales
ratio, a measure of how many months it would take to exhaust
stock, rose to 1.34 from 1.32 in November.