-Mazen Issa, senior Canada macro strategist at TD Securities
Canada's manufacturing sector shrank for the first time this year as factory shipments fell the most in more than five years in August led by a drop in automobile shipments. Manufacturing sales plunged 3.3% to C$52.1 billion from the upwardly revised record of C$53.8 billion, the fastest path since May 2009, according to Statistics Canada, exceeding analysts' forecasts for a 2% fall. Sales dropped after seven months of gains boosted by automakers meeting robust demand. Sales for the reported month dropped in 16 of 21 industries, making up about 81% of the country's manufacturing, Statistics Canada said. Sales of transportation equipment fell 12.8% to $8.9 billion in August, mostly due to fewer sales of motor vehicles and parts.
Also, August's inventories decreased 0.6% to $71.3 billion amid lower petroleum and the coal product industry. Some of the declines were compensated by the primary metal industry. Meanwhile, Canada recorded the largest trade deficit in nine months in August, as imports rose 3.9% while exports declined 2.5%, leading to a $610 million trade gap. Exports were hurt by the shrinking cars and parts category, which plunged 11.2% to $6.1 billion in August. The Bank of Canada highlighted in its September statement that Canadian exports need to continue strengthening in order to add to sustainable growth.
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