Total B.C. manufacturing shipments rose 0.7% to a seasonally adjusted $4.7 billion during the month following an August retrenchment, with year-over-year growth at a healthy 7.4%. That said, momentum has lost steam following a June peak.
Shipments of non-durable goods rose 0.8%, marking a second consecutive gain to extend a strong upward trend. Shipments were up 11% year-over-year. A key driver has been a 25% increase in year-over-year sales of paper, accounting for about one-third of the 12-month gain.
In contrast, the value of durable goods shipments has generally eroded over the past quarter, albeit still up 5% from a year ago. Wood product sales have declined and were up only 2.8% year-over-year, compared with a 5% August gain. A slump in U.S. housing starts, due in part to higher interest rates, has curtailed lumber prices. This has affected dollar-volume sales. Prices have continued to decline since September. Decreases in primary metal manufacturing (down 17% year-over-year) and machinery (down 2.5% year-over-year) were also drags. Non-metallic mineral products (up 16.7% year-over-year) and transportation equipment (up 14% year-over-year) were positive drivers.
Despite a recent slide, year-to-date dollar-volume manufacturing sales rose 9% through the first nine months of 2018. However, higher product prices have largely been behind the increase, with paper and wood products driving about half the net gain. There is insufficient information to assess the contribution of petrochemicals, which are also a significant driver. Manufacturing will continue to trend higher with global and U.S. demand for exports, although negative risks remain. These include a higher interest rate environment and the ongoing U.S.-China trade dispute, which could upend the global trade environment.
New vehicle sales in B.C. remained elevated in September, but the trend has eroded over the past year. Total new vehicle sales in the region, which includes data from the Canadian territories, reached 19,091 units. This was 11% lower than the same month in 2017.
While still elevated on a historical basis, seasonally adjusted sales are down nearly 10% from mid-2017’s peak levels. Year-to-date sales were down nearly 5%.
Solid population growth, a tight labour market and moderate strength in the economy continue to support a high level of sales.
However, higher interest rates and less replacement demand after a robust sales period in recent years have contributed to the slowdown. Higher interest rates have made financing more expensive, while adding more pressure to highly indebted households.•
Bryan Yu is deputy chief economist at Central 1 Credit Union.
