Canadian factories post record quarter as June sales rise for a fifth month

Canadian manufacturers had their best quarter on record in the spring, Statistics Canada reported Friday, even as a sharp drop in refined-fuel prices held June's headline gain to almost nothing.

Manufacturing sales rose 0.1 per cent to $78.8 billion in June, the fifth consecutive monthly increase. Economists had expected a 0.1 per cent decline. For the second quarter as a whole, sales jumped 9.3 per cent to $235.1 billion, the highest level on record.

Under the hood

The flat headline hides a stronger picture. Excluding petroleum and coal products, sales rose 2.6 per cent in June, and in constant dollars, which strip out price changes, total sales were up 1.2 per cent. The Industrial Product Price Index fell 1.4 per cent over the month.

Unfilled orders climbed 1.2 per cent to a record $131.8 billion, helped by a 2.4 per cent increase in aerospace backlogs. Inventories rose 0.6 per cent to $126.8 billion, and the capacity utilization rate edged up to 82.3 per cent from 82.2 per cent.

• Petroleum and coal products fell 14.1 per cent to $10.1 billion, mainly on lower prices for petroleum and energy products.
• Chemical sales rose 6.0 per cent to $6.3 billion, the highest since October 2022.
• Transportation equipment rose 2.8 per cent to $12.4 billion, with motor vehicle parts up 6.2 per cent and aerospace up 6.0 per cent.
• Sales rose in 15 of 21 subsectors and in seven provinces, led by Quebec and Alberta.

A Quebec story, too

Quebec sales rose 1.5 per cent to $20.3 billion, driven by aerospace and primary metals, with alumina and aluminum both contributing. Aerospace production in the province reached a record $2.1 billion in June. In Alberta, sales rose 1.6 per cent to $10.8 billion, with chemicals up 18.0 per cent.

Why caution is warranted

Much of the quarter's record value reflects prices rather than volumes. Petroleum and coal sales jumped 33.7 per cent in the quarter as energy prices surged, and constant-dollar sales rose a more modest 4.6 per cent. Factory sales were up 14.5 per cent from a year earlier in June, but that comparison is flattered by fuel prices that remain far above last year's levels.

Trade policy is the other cloud. The release does not cover the U.S. tariffs of 50 per cent on a range of Canadian goods that are scheduled to start next week, and some of the products targeted come from the manufacturing sector. Statistics Canada will publish an advance estimate for July on Aug. 24.

What it means for Canadians

A growing order backlog is generally good news for factory jobs, especially in aerospace and auto parts. But headline numbers inflated by energy prices can overstate how much real activity is happening, so it is worth watching volume measures and jobs data in the months ahead. For investors, the report highlights how closely Canada's industrial economy is tied to commodity prices and U.S. trade policy. This is general information, not personal advice.

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