Canadian manufacturing rebounds in fourth-quarter despite soft December

The Bank of Canada should be pleased with a year-end rebound in the Canadian manufacturing sector, according to new report from Scotiabank.

Statistics Canada said manufacturing sales in the fourth quarter of last yearrose by about 2.8 per centto $164.8billion, driven in partbyhigher sales of petroleum and coal products, but mostly due to higher prices.

Therise in the three months to Decemberfollowed a1.8 per centdecrease in sales inthe previous quarter.

"I would think that on net the [Bank of Canada]will be encouraged by the magnitude of the rebound in the manufacturing sector over the fourth quarter relative to the soft patch in [the third quarter]," said Derek Holt, economist at Scotiabank in a note on Friday.

Holt pointed out that fourth-quartermanufacturing sales volumes were up by a "quite solid" 4.4 per cent from the third quarteron a seasonally adjusted and annualized rate.Thatoffsets the 1.4 per cent decline seen in July to September period.

December softness

While the fourth quarter, as a whole, was up, manufacturing sales in Decemberwas down.

Statistics Canada saidsales declined0.3 per cent to $55.5billion, following a revised increase of3.8 per centin November.That was due toa rebound in automotive shipments after the October shutdowns.

Statistics Canada said the December decline was mainly the result of lower sales in the petroleum, coalandfood manufacturing sectors.

Economists at TD noted that the slide in December was not a surprise, as the November bounce hadn't been expected to continue.

"Having said that, the [December] performance was still somewhat disappointing, with the value and volumes of shipments down a touch and nearly half of all industries reporting declines," TDeconomistMichael Dolegasaid in a commentary.

Dolega said that in the wake of the softDecember manufacturing report, TD has reduced its forecastfor fourth-quartergross domestic product by about 0.2 percentage points to two per cent.