Tariff-Hit Factory, Wholesale Sales in Canada Fell in April
(Bloomberg) -- Canada's trade-driven sectors are showing clearer signs of a pullback in activity brought on by US President Donald Trump's tariffs.
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Manufacturing sales fell 2.8% in April, the largest monthly drop since October 2023 and the lowest level since early 2022, while wholesale sales dropped 2.3%, Statistics Canada data showed Friday. Both declines were deeper than the median projections in a Bloomberg survey of economists.
In volume terms, sales for manufacturers dropped 1.8% and down 2.2% for wholesalers. Total manufacturing inventories dropped 1%, while wholesale inventories fell 0.2%.
The figures point to weakness in the two sectors that are tied to US trade, with about half of manufacturers and wholesalers reporting being affected by tariffs and trade tensions. These declines are happening amid April's record trade deficit, and suggest exports and inventory accumulation that propped up gross domestic product in the first quarter won't provide much support for growth in the middle of this year.
The Trump administration's tariffs on imported steel, aluminum, autos and other products are hitting the sectors hard because the US is the biggest market for Canadian manufacturers, who sold about half of their products to foreign customers, with about 80% going to its southern neighbor. Wholesale trade also showed some pressures on consumption, supply chains and business activity.
Prime Minister Mark Carney's government hopes to reach a deal with the US, which would reduce trade uncertainty and tariffs. With risks of a severe economic downturn this year subsiding, some economists are starting to expect Bank of Canada policymakers to continue keeping interest rates at the current level. Others still see at least one more rate reduction this year.
In April, lower sales of petroleum and coal products, motor vehicles and primary metals led the decreases in manufacturing receipts. Similarly, declines in wholesale receipts were led by motor vehicles and parts.
'So far for April we have sharp declines in wholesale, manufacturing, exports and imports. The tariffs hit impacted sectors hard. Home sales were about flat in the month, while the election will provide a small bump to activity,' Benjamin Reitzes, rates and macro strategist at Bank of Montreal, said in an email.
'Given the data in hand, the risks are clearly skewed to the downside for April gross domestic product from Statistics Canada's early estimate of +0.1%.'
Andrew Grantham, economist at Canadian Imperial Bank of Commerce, also said the data suggest the monthly GDP figure will be downgraded. 'April GDP is probably more likely to come in at a flat reading or possibly a slight negative, which would also leave Q2 tracking broadly flat relative to the prior quarter,' he said in a report to investors.
--With assistance from Erik Hertzberg.
(Adds economist comments to the bottom paragraphs.)
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