Manufacturing muted in March
While the drop in March is large, it is not out of the ordinary in Alberta
By ATB Economics 14 May 2020 1 min read
Shipments from Alberta’s factories fell 6.6 per cent in March (-$408 million) compared to February. On a year-over-basis, sales were down 11.1 per cent (-$727.8 million).
Because oil refineries form one of the largest slices of Alberta’s manufacturing pie (typically around 25 per cent of total sales), we often see large monthly shifts in the value of our manufacturing shipments as gasoline prices rise and fall. The same is true for other parts of our manufacturing sector linked to oil and gas and other natural resources such as petrochemicals, plastics, wood, and oil and gas equipment and supplies.
So while the drop in March is large, it is not out of the ordinary in Alberta. For example, total manufacturing sales fell by 7.7 per cent in June 2019, by 6.9 per cent in November 2018, and by 7.5 per cent in April 2018.
All of this is to say that, while the COVID-19 pandemic’s negative impact on gas prices and overall demand for manufactured goods around the world explains much of the drop in March, this sort of volatility is not unusual in Alberta.
Nationally, however, the 9.2 per cent drop in monthly sales is out of the ordinary and was, according to Statistics Canada, “the largest percentage decline since December 2008, during the previous [national] recession.”
For both Alberta and the country as a whole, “[g]iven ongoing lower demand, together with continued challenges to global supply chains and ongoing physical distancing measures, the March decline in sales is expected to continue into April.”
Looking at the three largest manufacturing subsectors in Alberta, unadjusted year-over-year sales of food products improved by 17.3 per cent, petroleum and coal products declined by 39.1 per cent, and chemicals slipped by 1.8 per cent.