Drop in Autos Leads Surprise Decline in Canadian Manufacturing

(Bloomberg) -- Factory production unexpectedly fell in Canada on a temporary slowdown in the auto sector.

Manufacturing sales fell 0.6% in April, Statistics Canada said Thursday from Ottawa. Economists surveyed by Bloomberg were expecting factory output to increase 0.4%.

The pullback follows a revised 2.6% gain in March, which was the largest since the end of 2017. In volume terms, sales fell 0.8%.

Slowing output in the transportation sector was the primary drag, declining 6.7%. Motor vehicle production fell 8.9%, mostly due to “temporary plant shutdowns and fewer units assembled,” according to Statistics Canada.

The nation’s economy is emerging from two quarters of stagnant growth, but Tuesday’s report may shake confidence in a quick return to form. The Bank of Canada, which has indicated interest rates are on hold even as the Federal Reserve weighs a cut, expects output to pick up in the second half of this year.

April’s sales drop, however, was somewhat isolated. Output fell in just 8 of 21 industries, and excluding the auto sector factory production rose 0.5%. Inventories increased 1.3%, led by petroleum and coal, bringing the inventory to sales ratio to 1.53 -- the highest since 2009.

To contact the reporter on this story: Erik Hertzberg in Ottawa at eschmitzhert@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary

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