Canadian Factory Sales Rebound With Stronger-Than-Expected Gain

(Bloomberg) --

Canadian factory sales recorded a stronger- than-expected rebound in May, adding to signs of improving health for the nation's manufacturers.

The value of factory sales rose 1.4 percent, more than making up a 1.1 percent decline the previous month, Statistics Canada reported Tuesday from Ottawa. The May increase came as gains in machinery helped make up for a sharp decline in auto production during the month. Economists had been anticipating a 0.4 percent gain for May according to a Bloomberg survey.

The recovery highlights how manufacturing is benefiting from a robust U.S. economic expansion and a weaker Canadian dollar, and the gains should reinforce expectations that factories will continue to provide a bigger contribution to growth than they have for much of the past decade -- particularly as consumer spending slows.

Sales in May rose in 14 of 21 industries, representing 64 percent of the total. Excluding autos, sales were up 2.6 percent, the fastest since 2011. The gain was driven by an 8.9 percent gain in machinery sales. In volume terms, total sales were up 0.9 percent.

The strong increase in other sectors masked a sharp drop in motor vehicle shipments, down 6.6 percent. In previous reports, Statistics Canada said there were supply disruptions in the sector during the month.

Other indicators show the outlook for shipments remains positive. New orders were up 4.9 percent in May, and are 11.9 percent above year ago levels.

With this release, Statistics Canada also begun publishing monthly capacity utilization rates for manufacturing. Unadjusted capacity utilization increased to 81.9 percent in May, from 80.6 percent in April, the statistics agency said.

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