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OTTAWA (Reuters) - The value of Canadian manufacturing sales unexpectedly fell 0.4 percent in June from May as lower prices and volumes and continued refinery shutdowns hit the oil sector, Statistics Canada said on Thursday.
In the same month, foreign investors reversed a two-month buying spree of Canadian securities and dumped the most Canadian bonds since December 2008. Analysts blamed seasonal effects and said the attraction of Canada as a safe haven remained strong.
Analysts also said the factory figures were not quite as gloomy as they looked, given that overall sales volumes actually grew slightly and Statscan revised May's initial 0.4 percent month-on-month drop to a flat reading.
The manufacturing data were the latest in a string of economic indicators to suggest that the European crisis and the weak U.S. economy are hurting Canada's export-dependent economy.
Markets had expected a modest 0.2 percent rise in manufacturing sales. In constant dollar terms, June sales rose 0.1 percent and 12 of the 21 industries in the survey reported higher sales.
Manufacturing sales climbed steadily after the 2008-09 recession. But the June decline was the fourth in the past six months, leaving total sales at C$48.9 billion ($49.4 billion), below their pre-recession peak.
Scotia Capital analysts Derek Holt and Dov Zigler noted that new orders were up by 1.7 percent and unfilled orders increased 2.2 percent while inventories fell by 1.7 percent.
"Much of the headline weakness was narrowly based in energy by sector," they said in a note to clients.
Canada, a major energy exporter, is particularly vulnerable to price changes. Sales fell 10.6 percent in the petroleum and coal product industry, reflecting a 4.9 percent drop in prices, several refinery closures and lower sales volumes at others.
The data had little impact on the Canadian dollar, which at 9:30 a.m. EDT (1330 GMT) was at C$0.9888 to the U.S. dollar, or $1.011, down slightly from an earlier session high of C$0.9883, or $1.0118.
"The manufacturing sector has struggled this year, and will continue to do so over the balance of the year as the global growth backdrop is expected to remain subdued," TD Securities analyst Mazen Issa said in a note.
"Heading forward, the economy will be hard-pressed to register anything more than its trend rate of growth."
Issa predicted that second quarter GDP growth should match the Bank of Canada's mid-July estimate of 1.8 percent. The central bank -- which cut the forecast from 2.5 percent -- has kept its key rate frozen at a near-record low of 1.0 percent since September 2010.
Statscan said the transportation industry, the biggest manufacturing sector, reported a 1.7 percent increase in sales to the highest level since November 2007.
Inventories fell 1.7 percent, dragged down by the aerospace and energy industries, and the inventory-to-sales ratio declined to 1.32 in June from 1.34 in May.
Statscan also said foreign investors dumped C$7.9 billion ($8.0 billion) worth of Canadian securities in June after record high purchases in May.
They unloaded C$7.8 billion of bonds from their portfolios, partly the result of retiring bonds of the federal government and its enterprises, Statscan said.
"On the surface, the bond sales appear to buck the trend of increasing capital inflows, but this is more due to the time of the year," said Michael Gregory, analyst with BMO Capital Markets, adding that bond maturities explained much of the change as they did in June 2011.
"The appetite for Canadian fixed income remains whetted, apart from June's annual distortion," he said.
Additional reporting and writing by David Ljunggren