Shipments from Canadian manufacturers slid 0.1% in June. The drop was driven by shipments of wood products, which plunged 7.8% in the month due to the re-instatement of U.S. softwood lumber duties on May 21. Prices of wood products also fell 3.5% in the month. Excluding the wood industry, manufacturers’ shipments rose 0.4% in June.

Apart from the wood products industry, say Bank of Montreal economists, two other areas of weakness were the oil and coal products industry and the computer and electronic products industry. These declines were partly offset by rising shipments in the aerospace and automobile industries.

Factory inventories rose 0.3% in June, notes BMO. But the inventory-to-shipments ratio was unchanged at 1.43 in June. And, unfilled orders rose 0.8% – the fifth consecutive monthly increase. “The slide in lumber shipments exaggerates the softness in this report, although underlying activity does appear to be gradually cooling alongside softer U.S. growth,” says BMO.

“Though the shipments data were in line with market expectations, the Canadian dollar weakened following the release. The report suggests the
economy took a breather in mid-summer. Given the uncertainty about the strength of the US recovery, we believe the Bank of Canada will pause in its
tightening cycle in September.”

The details of the shipments report were “encouraging,” say RBC Financial Group economists. They were strong enough to revive rate hike talk. “To the degree that this report adds any new information, it will be viewed as positive by the Bank of Canada and adds to the argument that a 25 basis point hike is in order at the next policy meeting on September 4.”