OTTAWA - Canada's manufacturing sector posted record sales for July and topped expectations as it gained 2.5 per cent.
Statistics Canada said Tuesday that manufacturing sales for July, the first month of the third quarter, totalled $53.7 billion — beating the previous record of $53.2 billion set in July 2008.
Economists had expected a gain of one per cent, according to Thomson Reuters.
TD Bank economist Brian DePratto said "manufacturers started the third quarter with a bang."
"What's more, the breakdown of real versus nominal shipments in July also paints a positive picture, with sales led by growth in volumes, rather than prices," DePratto wrote in a note to clients.
In constant-dollar terms, sales rose 2.8 per cent in July, suggesting the gain was mainly due to a rise in volumes rather than prices.
The robust start to the third quarter for the manufacturing sector follows a second quarter that saw the economy as a whole grow at an annual rate of 3.1 per cent, its strongest pace in nearly three years.
DePratto noted the manufacturing sales data suggests strong underlying demand entering the second half of 2014.
"The strong pace of growth seen in the second quarter may be thus be sustained, or even outpaced in the third quarter. As a result, we are expecting real GDP growth of around three per cent in the third quarter, with notable upside risk," he said.
Manufacturing sales have been trending upwards since January.
July sales were up 16 of 21 industries in, representing about 56 per cent of the country's manufacturing.
Statistics Canada said the July gain was mainly due to higher sales in the transportation equipment and primary metals industries. Transportation equipment sales rose 10.3 per cent to $10.1 billion in July, while primary metal sales rose 4.0 per cent to $4.2 billion.
Five industries reported lower sales, with food manufacturing reporting the largest decrease, down 1.4 per cent to $7.9 billion.
Economist David Madani of Capital Economics, one of the most bearish marketwatchers on Bay Street, noted the July strength was driven mainly by the auto sector.
"Some of this strength most likely reflected producers efforts to ship vehicles overdue to be exported, following the build-up of inventories over the unseasonably harsh winter," Madani wrote in a report.
However, he conceded the numbers did suggest the economy has made progress in recent months.
"The continued strength in manufacturing sales in July, combined with some upward revisions to the gains in the months before, suggests that the economy began the third quarter on a stronger footing than we had previously assumed," Madani wrote.
"Accordingly, the risks to our annualised 1.5 per cent third-quarter GDP growth estimate lie firmly to the upside."
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