Statistics Canada's monthly manufacturing survey, released Thursday, found that about half the August loss was due to a drop in sales of motor vehicles and parts. Without motor vehicles and parts in the mix, manufacturing sales slid 1.9 per cent.
Economists had expected a loss of 1.6 per cent, according to Thomson Reuters.
Manufacturing sales had been trending upwards since January, but August's sharp drop essentially wiped out June and July's gains.
"The report speaks for a potentially more difficult second half of 2014, after the very promising first half," wrote Jimmy Jean of Desjardins Economic Studies in a note.
"To be sure, part of the weakness is payback for a very strong month of July, but given the current context for global trade and industrial output, the case for a bullish manufacturing outlook for Canada is not necessarily compelling."
Sales in August were down in 16 of 21 industries, representing about 81 per cent of the country's manufacturing, Statistics Canada said.
In constant dollar terms, sales fell 3.7 per cent, suggesting a lower volume of products was sold.
Sales of transportation equipment fell 12.8 per cent to $8.9 billion in August, Statistics Canada said, mostly because of fewer sales of motor vehicles and parts.
After a gain of 13.7 per cent in July, which was stronger than usual, sales in the motor vehicle industry fell 12 per cent to $4.5 billion in August. Sales in the parts industry were down 10.8 per cent to $2 billion for the month — the second drop in eight months.
Statistics Canada also said sales of petroleum and coal products fell 3.4 per cent to $7.3 billion.
There were fewer sales in seven provinces in August, mostly concentrated in Ontario.
The agency added that total inventories fell 0.6 per cent to $71.3 billion in August. It was the second time total inventories have fallen in eight months.
Jean described the results as "sourly disappointing" and said they support the Bank of Canada's position that recovery of non-energy and trade-sensitive areas of the country's economy remain uncertain.
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