Canadian Factory Shipments Rise More Than Forecast
Canadian factory shipments rose more than twice as much as forecast in December, led by sales of cars and airplanes.Shipments gained 1.7 percent to C$49.7 billion ($42.6 billion), the highest since July, Statistics Canada said today in Ottawa. Economists expected a 0.7 percent increase, according to the median of 22 estimates in a Bloomberg News survey.
The report suggests the Bank of Canada, which left interest rates unchanged last month, was right in saying factories have adjusted to a currency that rose by a third since 2003. Today’s data, combined with a surge in employment since September and a trade surplus that expanded for two straight months, may remove any need for central bankers to consider cutting interest rates.
“The worst for Canadian manufacturers may be behind us,” Marc Levesque, an economist with TD Securities in Toronto, said in a note to clients. The numbers “certainly punch another big hole in any lingering hopes that the Bank of Canada will be easing monetary policy over the course of 2007.”
Thirteen of the country’s 21 manufacturing industries accounting for 74 percent of factory output posted gains in December, with shipments by carmakers surging 7.2 percent to C$5.6 billion, the statistics agency said. Excluding price changes, overall shipments rose 1.4 percent to C$45.6 billion.
The Canadian dollar rose to 86 U.S. cents, a six-week high, at 4:16 p.m. in Toronto, from yesterday’s 85.77 cents. Manufacturers have had a reprieve on the currency front, with the Canadian dollar dropping 6 percent since touching a 28-year high of 91.44 U.S. cents on May 31.
Interest Rates
Policy makers kept the benchmark lending rate at 4.25 percent for the fifth-straight meeting Jan. 16, and later said they saw no need to cut interest rates to boost demand. The economy will expand 2.4 percent in the first quarter and 2.6 percent in the second quarter, after slowing to a 1.5 percent annualized rate in the fourth quarter, central bankers say.
A majority of 12 economists surveyed by Bloomberg News between Jan. 31 and Feb. 8 said they saw that forecast as too optimistic and predicted a fourth-quarter rate cut.
The manufacturing numbers follow a Feb. 13 report showing Canada’s trade surplus widened more than expected in December to the largest since February 2006, as exports of cars and energy products gained.
The surplus widened to C$4.98 billion from a C$4.72 billion in November, Statistics Canada said. Exports rose 3.8 percent to C$40.4 billion and imports advanced 3.6 percent to C$35.4 billion, the agency said.
Durable Goods
Today’s report showed durable goods shipments rose 3 percent to C$27.5 billion in December, including a 4.1 percent gain in shipments by aerospace companies.
Excluding cars, manufacturing shipments increased 1 percent to C$41.7 billion, the statistics agency said.
Inventories fell 0.6 percent to C$63.1 billion, while new orders increased 2.1 percent to C$50.6 billion. Unfilled orders gained 2.1 percent to C$42.9 billion.
For all of 2006, shipments fell 0.6 percent from 2005’s record level, to C$587 billion on a nominal basis. Adjusting for price changes, they dropped 1.6 percent to C$539 billion.