Canadian factory sales slid sharply in January, pulled down by automakers as the North American car market deteriorated, pointing to a further economic contraction and possible central bank credit easing. Manufacturing shipments fell 5.4 percent in January from December on a record drop in sales of autos and auto parts in the month, Statistics Canada said on Tuesday.
In a separate report, it said labour productivity at Canadian businesses slid a sharper than expected 0.5 percent in the fourth quarter of 2008, leading to the first annual decline in productivity in Canada since 1996.
The fall in the more closely watched manufacturing numbers was slightly better than the 5.8 percent decline that the market had forecast. It followed an 8.2 percent drop in December. Excluding autos, sales fell a more modest 1.2 percent in January. However, in volume terms, overall sales tumbled 6.4 percent - the biggest such decrease since Statscan began the data series in 1997. The Canadian dollar weakened immediately after the report before rising again to trade at about C$1.2730 to the US dollar, or 78.55 US cents, late on Tuesday morning, compared with C$1.2735 to the US dollar, 78.52 Canadian cents, at Mondays close. The data was the latest in a series pointing to a deepening economic recession in Canada. Reports last week showed 82,500 jobs lost in February and a record trade deficit in January.
Bank of Canada Governor Mark Carney said on the weekend the bank would likely revise its economic forecasts lower in an April 23 report. In January, the bank forecast a sharp 4.8 percent contraction in the first quarter, a second-quarter contraction of 1 percent followed by a return to growth in the second half of the year.
It projected 3.8 percent annual growth in 2010. Sales dropped in 14 of 21 industry groups covered in the January report. Meanwhile, labour productivity in Canada fared poorly compared with the United States as the gross domestic product of the business sector shrank 1.3 percent in the fourth quarter, while the number of hours worked dipped just 0.8 percent. For all of 2008, Canadian productivity fell 1.1 percent, the first annual decline since 1996. Productivity in the United States fell 0.1 percent in the fourth quarter and rose 2.7 percent in the year.