A rise in manufacturing sales in July could indicate early signs of a recovery after the sector was hit hard by tariffs, one economist says.
Statistics Canada reported Monday that manufacturing sales rose 2.5% to $70.3 billion in July, helped by strength in the transportation equipment subsector.
Sales of transportation equipment rose 8.6% to $11.4 billion, boosted by an 11.4% increase in motor vehicles and a 7.2% gain in motor vehicle parts, the agency said. Aerospace products and parts sales also rose 6.5%.
“The increases in manufacturing and wholesale sales in July suggest tentative signs of a recovery in two of the sectors hardest hit by U.S. tariffs,” said Thomas Ryan, North America economist at Capital Economics, in a note Monday.
July’s increase in manufacturing sales marked the second consecutive month of gains after a 0.3% rise in June.
“This points to a nascent turnaround in the sector after the sustained U.S. tariff-driven weakness in February-May,” he said.
Ryan highlighted that primary and fabricated metals sales both rose 4% month-over-month, “suggesting the two sub-sectors hardest hit by U.S. tariffs have moved past the worst of their struggles.”
U.S. President Donald Trump introduced 25% tariffs on all imports of steel and aluminum in March this year and doubled them to 50% in early June. The move prompted a response from the Canadian government, including counter-tariffs on steel, aluminum and autos that remain in effect amid negotiations.
Meanwhile, Statistics Canada said sales for the petroleum and coal products subsector climbed 6.2% to $7.2 billion in July.
On a constant dollar basis, manufacturing sales gained 1.6% month-over-month in July.
In a separate report, Statistics Canada said wholesale sales — excluding petroleum, petroleum products, other hydrocarbons, oilseed and grain — rose 1.2% to $86 billion in July.
In volume terms, wholesale sales excluding those items increased 0.8% in July.
While the rise in manufacturing and wholesale sales suggests a rebound is underway, Ryan said he expects it to be a slow process.
Specifically, data that was less encouraging included a 2.2% decline in new orders and a reading from the S&P Global Manufacturing Purchasing Managers’ Index below 50, indicating a contraction.
Despite the monthly increase, Statistics Canada said total manufacturing sales were still down 1.7% on a year-over-year basis.