Manufacturers get a break in April

Fri Jun 13, 2008 3:03pm EDT
 
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By Louise Egan

OTTAWA (Reuters) - There was good news from Canada's battered manufacturing sector in April but it came after a first quarter that was marked by an overall slide in labor productivity.

Statistics Canada reported on Friday an unexpectedly strong 2 percent surge in factory sales in April, more than offsetting a 1.7 percent slide in March, due in part to soaring prices for petroleum products.

The market was taken by surprise by the good news, having forecast a mere 0.1 percent gain. But analysts did not expect April's strength to carry through to the rest of the year as the manufacturing sector is a soft spot in Canada's economy because of its reliance on U.S. demand and its sensitivity to the Canadian currency.

"With the strong Canadian dollar and sluggish U.S. demand, we expect the manufacturing sector to be less buoyant in the coming months, as it is unlikely to maintain this brisk pace of activity, particular given the big drop in new orders," said Millan Mulraine, economics strategist at TD Securities.

A separate Statscan report showed a second straight quarterly decline in labor productivity in the first quarter, which was partly a result of manufacturers scaling back production. Productivity fell 0.3 percent as employment expanded and unit labor costs rose despite an economic contraction.

The data had little impact on the Canadian dollar as markets focused on U.S. inflation data. The currency slipped 0.3 percent against the U.S. dollar to C$1.0260, or 97.47 U.S. cents, down from C$1.0232 to the U.S. dollar, or 97.73 U.S. cents, at Thursday's close.

WIDESPREAD GAINS

A spike in commodity prices helped jack up sales of petroleum and coal products at the factory gate by 9 percent.   Continued...