Canada seen ok despite gloomy factory sales, securities sell-off

Thu Aug 16, 2012 10:37am EDT
 
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By Louise Egan

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.   Continued...

 
A construction worker walks past the steam generating facility at the Cenovus Foster Creek SAGD oil sands operations near Cold Lake, Alberta, July 9, 2012. REUTERS/Todd Korol