March 19, 2013 / 2:23 PM / in 5 years

WRAPUP 1-Canada factory sales raise concerns about Jan. growth

* Factory sales dip 0.2 pct vs forecast of 0.9 pct gain

* Volatile aerospace explains drop in sales, jump in new orders

* Wholesale trade rises 0.3 pct on computers, electronics

* Subsector has dominated wholesale data for three months

By Louise Egan

OTTAWA, March 19 (Reuters) - Canada’s hard-hit manufacturers failed to bounce back in January after a dismal year-end performance, an early sign that the economy may continue to stumble in early 2013, partially offset by more upbeat wholesale activity in the month.

Factory sales slipped 0.2 percent in the month due to weak production in the volatile aerospace industry as well as in the auto and energy industries, Statistics Canada said on Tuesday.

Market players had expected a 0.9 percent gain after a 3.3 percent tumble in December - the worst performance since May 2009 during the Great Recession.

“The rebound expected in manufacturing in January did not materialize,” said Jimmy Jean, economic strategist at Desjardins Capital Markets.

“Instead, the report points to continued weakness in autos, which combined with a sharp payback in aerospace to drive manufacturing sales in Ontario and Quebec markedly down,” he wrote in a note to clients.

The Canadian dollar weakened to a session low versus its U.S. counterpart immediately after the data. At 9:50 a.m. (1350 GMT) the Canadian dollar was trading at C$1.0252 to the greenback, or 97.54 U.S. cents, compared with C$1.0223, or 97.82 U.S. cents, at Monday’s North American close.

Manufacturers have yet to fully recover from the 2008-09 recession even though Canada’s overall economy has long since recouped all the output and jobs lost during the crisis.

Business leaders are hoping the federal government’s budget, to be unveiled on Thursday, will extend a temporary measure that allows them to write-down investments in machinery and equipment more quickly, generating a bigger cash flow.

The sales volume of factory sales fell 0.4 percent in January from December.

But some details of the report suggested the news might not be as bad as it appeared on the surface. New orders rose 5.1 percent, unfilled orders jumped 5.8 percent and inventories grew 1.7 percent, Statscan said.

The report also showed the aerospace sector, which typically involves large orders resulting in large monthly changes, influenced much of the manufacturing data for January.

The 19.7 percent drop in production in aerospace products and parts pushed down sales in the transportation equipment sector by 3.8 percent in January.

The motor vehicle assembly industry slumped 3.7 percent. Excluding autos, factory sales inched 0.1 percent higher in the month.

Sales in the petroleum and coal product sector decreased 1.8 percent, mostly reflecting lower volumes.

WHOLESALE DATA UPBEAT

A surge in demand for computers and electronics drove up wholesale trade activity in January by 0.3 percent from December, Statistics Canada said on Tuesday.

In volume terms, wholesale trade grew 0.5 percent.

“The 0.5 percent gain in volumes goes some way to offset declines on the factory side that month, suggesting GDP likely increased in January, although we still await data from the retailing sector to confirm that view,” said Emanuella Enenajor, economist at CIBC World Markets.

January retail sales data will be released on Thursday.

An 8 percent jump in sales of computer and communications equipment and supplies led to a 3.2 percent rise overall in the machinery, equipment and supplies subsector.

Four of the seven subsectors, representing about two-thirds of wholesale trade, reported gains in the month. The second-largest increase was in personal and household goods, which rose 1.0 percent.

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