By Paul Vieira
OTTAWA--Canadian factory sales dropped in April by more than anticipated, highlighting the weakness faced by one of the most trade-exposed sectors of the economy.
Manufacturing sales reached their lowest level since early 2022. The data indicate there's no rebound in the works for factory owners, with a gauge measuring new orders falling by the most in nearly three years. Combined with much softer-than-anticipated data on wholesale transactions, the broader and deeper underlying softness could persuade the Bank of Canada to cut rates again, as soon as July.
Canada manufacturing shipments in April fell 2.8% from the month before to a seasonally adjusted 69.59 billion Canadian dollars, the equivalent of about $51.16 billion, Statistics Canada said Friday. On a 12-month basis, sales decreased 2.7%.
Expectations, based on an early estimate issued by Statistics Canada, were for a 2% drop in April. The decline in April was the deepest since October 2023, when the United Auto Workers held strikes against all three big Detroit-based automakers.
On a price-adjusted, or constant-dollar basis, factory shipments fell 1.8% month-over-month and 3.7% lower than a year earlier.
Canada factory owners have struggled this year amid the abrupt turn in U.S. trade policy. The U.S. has imposed hefty tariffs on Canadian-made motor vehicles, steel, aluminum and goods that do not comply with the current U.S.-Mexico-Canada trade pact, or USMCA. Employment in the factory sector has declined by nearly 55,000 in the last four months, and Canada's unemployment rate has climbed to the highest rate since September 2016 outside of the peak Covid-19 pandemic period.
Canadian Prime Minister Mark Carney and President Trump are scheduled to meet during the Group of Seven leaders' summit in Kananaskis, Alberta, which starts Sunday, and officials from both countries say the outcome could determine how close Ottawa and Washington are in resolving the trade conflict.
"We think mounting weakness in the manufacturing sector, along with softness in the housing and the labor markets, will prompt the Bank of Canada to ease policy further later this year, despite the cautious tone taken at June's meeting," said Thomas Ryan, economist at Capital Economics.
Forward-looking gauges in the Canadian manufacturing report also painted a grim portrait. New orders dropped 6.8%, or the most since July 2022. Unfilled orders, or the stock of orders that can contribute to future sales if they aren't canceled, also decreased in April, by 1.1%. Inventories fell 1%, and the inventory-to-sales ratio rose to 1.71.
Meanwhile, Statistics Canada also released April data for wholesale transactions. Wholesale sales fell 2.3% to C$84.03 billion -- a much steeper decline than the 0.9% decrease previously projected by the data agency. Wholesalers - the largest component of Canada's services sector - connect farmers or manufacturers that produce goods with companies and public institutions that use them. They also import goods from other countries and redistribute them within Canada.
CIBC Capital Markets economist Andrew Grantham said the manufacturing and wholesale reports suggest a downgrade is in the offing for Statistics Canada's projection for a 0.1% increase in Canada's gross domestic product for April. "April GDP is probably more likely to come in at a flat reading or possibly a slight negative," Grantham said.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
06-13-25 1004ET
