TD Securities strategists project that Canadian Manufacturing Sales will decline by 0.4% month-on-month in June, a figure weaker than the market consensus of a 0.1% decrease. This anticipated drop is primarily attributed to lower petroleum prices, which have exerted a significant drag on the sector. The strategists note that this trend was already evident in June export data, where energy products reduced total exports by 2.6 percentage points, despite stable volumes. However, they point out that the smaller weighting of petroleum refineries in manufacturing sales should result in a less pronounced impact compared to exports [1].
Offsetting some of the negative effects from energy, TD Securities expects motor vehicles, metals, and other durable goods to provide sources of strength for manufacturing sales. The report highlights that broad-based strength in non-energy components would align with the S&P Manufacturing PMI reaching a four-year high, although this contrasts with a decline in hours worked across the manufacturing sector in June [1].
In terms of volumes, TD Securities anticipates a modest increase from May, suggesting that volumes will outperform the nominal sales figures. Nevertheless, this improvement is not expected to offer significant support to Canadian Gross Domestic Product (GDP) [1].
No specific market reactions or analyst opinions beyond TD Securities' forecast are mentioned in the article.
CONCLUSION
TD Securities forecasts a 0.4% month-on-month decline in Canadian Manufacturing Sales for June, driven mainly by weaker petroleum prices. While strength in motor vehicles and other durables may offset some losses, the overall impact on GDP is expected to be limited. Market sentiment appears cautious given the energy sector's drag.