Canadian manufacturing shipments rose 0.7% in August, although much of the growth was driven by price increases not resurgent economic strength.

The consensus expectation had been for a third straight decline. “However, the increase reflected higher prices for petroleum, coal, and food products rather than a turnaround in underlying activity,” notes BMO Nesbitt Burns.

The firm also cautions that while 14 of 21 industries reported higher shipments in the month, this followed a month or two of sharp declines for most. “On a year-over-year basis, shipments were down 5.6% in August, the sharpest decline since the GM strike in July 1998. The ongoing slump in high-tech industries was shown by a 41% year-over-year plunge in computer and electronics and a 17% year-over-year decline in electrical equipment shipments.”

Orders were about as expected, dropping by 0.6%, following a moderate increase in the prior month. “The three-month trend in orders suggests that the manufacturing sector was continuing to sputter, even prior to September 11,” says BMO. Also, inventories were flat on the month, following two months of decline.

BMO concludes that this report won’t be important to the Bank of Canada. “As this report pre-dates September 11, it will be of little interest to policymakers. Next month’s report is likely to show a sharp drop in September shipments.”