The latest Quarterly Business Conditions Survey released by Statistics Canada on Friday paints a positive picture of Canadian manufacturing going into the third quarter of this year. But some economists aren’t convinced.

The survey of about 4,000 Canadian manufacturers in the first half of July show that nine out of 10 expect that production in the next three months would change little or even increase. Another 82% indicated that their level of finished product inventories was about right.

The vast majority of manufacturers indicated they were still satisfied with both current levels of new orders and unfilled orders.

“What was also very encouraging about the survey was that only 16% of manufacturers reported a decline in new orders, the same percentage as three months ago and a far cry from the 36% reporting declining orders in January,” says RBC Financial Group. “Finally, employment levels in manufacturing should remain stable as three-quarters of respondents expect little change in the next three months. Employment in manufacturing has increased by 113,000 since the start of the year, most of it in Quebec and Ontario.”

However, BMO Nesbitt Burns offers a gloomier reading of the survey results. “In almost a direct echo of yesterday’s U.S. ISM report for manufacturing, today’s Canadian Business Conditions Index suggests that the factory sector is losing some momentum after a strong spring,” it says.

“[The survey] suggests that manufacturing activity is now just barely growing. Production, orders, and employment all cooled somewhat in Q3. While a small majority of firms are still reporting that orders are rising, the gap has narrowed in a sign that growth is losing momentum. Meantime, more firms are expecting to reduce payrolls rather than add to job totals in the next three months, indicating that Canada’s rip-roaring job gains of the first half will ebb.”

“There are two main messages in this report,” concludes BMO. “Manufacturing activity is growing at a modest clip, which is a huge improvement from a year ago. However, activity has cooled since the spring, and may cool further if U.S. growth continues to fade. This report clearly suggests that Canada is facing downward pressure from the U.S. lull – no economy is an island.”