Factory, housing data flash warning signal

Tue Aug 16, 2011 12:48pm EDT
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By Ka Yan Ng and David Ljunggren

TORONTO/OTTAWA (Reuters) - Canadian manufacturing sales slid more than expected in June, while sales of existing homes were flat in July, data on Tuesday showed, offering new signals that the Canadian economy is slowing.

Also, the Conference Board of Canada released a survey showing weaker corporate profits in the second half of the year.

Factory sales dropped a much greater-than-expected 1.5 percent in June from May, Statistics Canada said, all but confirming that the economy stalled in the second quarter. Analysts had expected a milder 0.4 percent decline.

It was the third consecutive monthly fall in manufacturing sales, which in June were at the lowest level since November 2010. A 1.6 percent increase in new orders and a 3.4 percent jump in unfilled orders provided some consolation in an otherwise disappointing report.

"Going forward, the overall weak profile for economic growth among Canada's key trading partners over the next few months is likely to weigh heavily on the manufacturing sector," said Francis Fong, an economist at Toronto-Dominion Bank.

"Sales will likely continue to struggle despite the thawing in global supply chains following March's Japanese earthquake and the (Canadian) dollar having pulled back by almost 5 cents from just a few weeks ago."

The Canadian dollar was at C$0.9819 to the U.S. dollar, or $1.0184, on Tuesday afternoon, down from a recent high of C$0.9407 to the U.S. dollar, or $1.0630 three weeks ago. A strong Canadian dollar makes Canadian-made goods more expensive in foreign markets.

The supply-chain problems, as well as the dampening effect of rising inflation on consumer spending, have added to the weaker outlook for profits, the Conference Board said.   Continued...

<p>A home is put up for sale in downtown Montreal, July 14, 2009. REUTERS/Shaun Best</p>