Canada manufacturing sales plunge, confirming weak trend

Fri Dec 14, 2012 10:14am EST
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By David Ljunggren

OTTAWA (Reuters) - Canadian manufacturing sales unexpectedly plunged by 1.4 percent in October from September in the latest sign the economy is struggling to cope with market problems abroad and due to the effect of a strong Canadian dollar.

Statistics Canada said on Friday that the drop - the biggest in nine months - was due to weakness in major sectors such as motor vehicles and primary metals.

Analysts had expected no change in manufacturing sales. Statscan revised September's performance to unchanged from an initial 0.4 percent increase.

"A slowdown in emerging market growth and uncertainty related to the fiscal crises in both the U.S. and Europe have all led to a deceleration in global economic momentum, especially in the second half of this year," TD Economics economist Francis Fong said in a note to clients.

The October drop was the greatest since a 2.4 percent retreat in January 2012.

Analysts said the poor performance would affect October's growth figures, due to be released next Friday.

The Bank of Canada has predicted fourth-quarter growth of 2.5 percent, annualized, which now looks rather optimistic. Canada's economy grew at a sluggish 0.6 percent pace, annualized, in the third quarter.

"While this (manufacturing) is only one data point, extrapolating this for the (fourth) quarter as a whole would suggest a quarterly annualized rate of growth a touch below 1 percent," said TD Securities strategist Mazen Issa.   Continued...

Newly built cars sit in a shipping lot near General Motors Car assembly plant in Oshawa, June 1, 2012. REUTERS/Mark Blinch