Canadian Dollar: Manufacturing sales drag from energy – TD Securities

TD Securities strategists forecast Canadian Manufacturing Sales to fall 0.4% month-on-month in June, weaker than the market’s -0.1% call, mainly due to lower petroleum prices. They expect motor vehicles, metals and other durables to offset some of the nominal energy drag, with volumes modestly outperforming but offering limited support to Canadian Gross Domestic Product (GDP).

Energy weakness weighs on manufacturing

"We look for manufacturing sales to fall 0.4% m/m in June on a large drag from lower petroleum prices (market: -0.1%)."

"This was foreshadowed in June exports, where energy products shaved 2.6pp from total exports despite stable volumes, although the smaller weight for petroleum refineries should result in a smaller drag for manufacturing sales."

"Motor vehicles will provide a source of strength to offset the nominal drag from energy products along with metal products and other durable goods."

"Broad strength across the ex-energy components would fit with a 4yr high in S&P's Manufacturing PMI but contrasts with a pullback in hours worked across manufacturing in June."

"Volumes should outperform the nominal print with a modest increase from May, although this will not provide much of a tailwind to GDP."