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Economy in Brief

Canadian Manufacturing Data And Prospects For Q3 GDP
by Louise Curley November 17, 2009

The news from Canada continues to raise doubts about the forecast of a 2% rise in GDP in the third quarter made earlier by Mark Carney, Governor of the Bank of Canada.  Monthly GDP declined in July and August. The continued strength of the C$ is affecting exports.

Today, data on sales, new and unfilled orders and inventories were released for the manufacturing sector and they were mixed.  Manufacturing sales were lower than expected but the pace of new orders and inventories was more encouraging.  New orders increased 8.3% in September after having declined in July and August.  Inventories continue to decline and the inventory sales ratio is now down to 1.46 from it peak of 1.63 in January of this year.  The ratio is shown in the first chart and is approaching what looks like a normal ratio of around 1.30.

While there may be some doubts about the magnitude of the rise in Canada's third quarter GDP, there is no doubt that the Canadian economy is at a turning point and will show some growth in the third quarter.  Most of the data relating to the Canadian economy released recently has been erratic--a step forward, then some retraction.  Nevertheless, the forward momentum has generally overcome the retraction.   In addition to manufacturing sales, the number of building permits authorized and retail sales are good examples of such data and they are shown in the second chart.  Recent changes in both series are volatile, but the trend for both is clearly positive.

Manufacturing Sep 09 Aug 09 Jul  09 Jun 09 May 09  Apr 09 
Shipments (M/M % Chg) 1.43% -1.77% 5.17% 3.28% -4.44% -0.36%
New Orders (M/M % Chg) 8.26% -1.20% -5.68% 20.38% -6.29% -11.16%
Unfilled Orders (M/M % Chg) -0.57% -5.06% -5.26% 2.11% -7.04% -5.88%
Inventories (M/M Change in Mil. C$) -1166.909 -299.573 -1257.203 -160.873 -1117.464 -719.741
Inventories/Sales Ratio 1.46 1.50 1.49 1.59 1.62 1.55
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