Canada factory sales surge

Fri Oct 14, 2011 10:45am EDT
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OTTAWA (Reuters) - Canadian manufacturing sales rose almost three times higher than expected in August and offered more evidence that the economy is on track for modest growth in the third quarter after a slump in the second.

A big jump in aerospace production outweighed a decline in auto sales to yield a 1.4 percent jump in overall factory sales in August from July, Statistics Canada said on Friday. The performance beat the market forecast of a 0.5 percent gain and was the second straight month of unexpectedly strong sales following three months of declines.

Sales totaled C$47.6 billion ($46.7 billion), the highest since October 2008.

August sales in constant dollars, used to calculate gross domestic product, rose 1.1 percent and shipments outside the auto sector were up 1.8 percent.

"We have no doubt that the economy fared much better in the third quarter," said David Madani, economist at Capital Economics. Gross domestic product contracted 0.4 percent in the second quarter on an annualized basis.

"Provided that business demand does not sour completely this quarter, then the economy is expected to end this year on a positive note, with a somewhat cheaper currency helping to buffer the blow from lower commodity prices to corporate profitability," Madani said in a note to clients.

The Canadian dollar pushed to a session high against the U.S. dollar after the Canadian report and after data that showed U.S. retail sales rose strongly in September.

The currency rose as high as C$1.0111 to the U.S. dollar, or 98.90 U.S. cents, from around C$1.0138, or 98.64 U.S. cents, immediately before the reports.