-Carolyn Wilkins, Senior Deputy Governor at Bank of Canada
Manufacturing sales in Canada surprised to the upside, led by auto industry sales. Canadian factory sales increased 1.7% to C$52.4-billion on month in December as a decline in the sale of petroleum and coal products was compensated by rise in transportation equipment, machinery, and food sales, Statistics Canada data showed. A weaker Canadian Dollar is supporting manufacturers by making their goods cheaper overseas, while improving economic conditions in the US is also helping. Motor vehicle sales advanced 9.0% to C$5.13-billion in December, while machinery rose by 5.2% to C$3.22-billion. Sales increased in 17 of 21 categories tracked by Statistics Canada, making up almost 80% of production. Excluding price changes, a better gauge of the industry's contribution to economic growth, factory sales climbed 2.9%. The December gain means that manufacturing sales rose by 5.2% from the same month a year earlier.
However, Bank of Canada Governor Stephen Poloz said manufacturing gains will not be sufficient to ensure a sustainable recovery, forcing him to make an unexpected interest-rate cut on January 21. Poloz said the Canadian economy is jeopardized by falling oil prices that are likely to crimp business investment in the energy-producing sector, as well as weaken the nation's terms of trade, which would impact incomes, wealth, and decrease domestic demand growth.
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