Statistics Canada reported this morning that manufacturing sales fell by 0.7 percent in December 2019, the fourth monthly decline in a row. Although sales for the entire year were up 0.5 percent, this marked a much slower rate of growth than in the preceding two years. The loss of momentum in the final months of the year is underscored by reported declines in both unfilled orders and new orders in December, as well as by a sharp fall in capacity utilization, which slipped to 76.3 percent in December from 80.0 percent in November.
The decline in manufacturing in December was partly attributable to the week-long closure of the entire CN rail network during the month as a result of industrial action. This strongly suggests that the current closure of the network everywhere east of Toronto, as a result of Indigenous blockades, will have a serious effect on industrial output in the current month. The blockades have already lasted twelve days, with no early end in sight. Since bulk products (propane, lumber, chemicals and such) form a large part of the freight transported by rail, the impact of the closure is likely to spread well beyond the manufacturing sector.
Just last week, Bank of Canada Governor Stephen Poloz stated that the Canadian economy was "in a good place". Given the blockades and the coronavirus outbreak, together with the fact that Canada has still not gotten around to ratifying the new USMCA agreement, this may not be a tenable view for very much longer.
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