Manufacturing sales fall more than expected, raising questions about growth

Manufacturing sales fell a larger than expected2.1 per cent in April the third decline in four months raising concerns that second-quarter growth figures might come in weaker than expected.

Sales hit $49.8 billion in April, meaning that monthly sales have plunged by 7.3 per cent hitting their peak last July. April's drop was due monthly to lower sales of food, petroleum and coal, and aerospace products.

• Canada adds 59,000 jobs in May

• May was the strongest month for home sales in more than five years

Sales in the aerospace industryplunged 17.8 per cent, reversing the 40.1 per cent sales gain reported in March. Statistics Canada blamed, in part, the appreciation ofthe Canadian dollar in April, which "reduced the value of sales and inventory in the industry."

Some analysts saythis report, when combined with two other weak manufacturing reportsearlier this year, flagunderlying concern about the strength of the Canadian recovery.

"We were hoping that manufacturing would take some of the slack left by oil and gas, but that doesn't seem to be happening," said MikeMoffatt, a professor at theIveyBusiness School at Western University.

"It suggests that the Canadian economy doesn't appear to be recovering as fast as we'd like," he told CBC News.

Factoring out the effect of price changes, shipments fell by 1.0 per cent in volume terms, a drop that RBC senior economist Nathan Janzen called "disappointing."

Positive GDP for Q2?

Janzen says thenegative sales figurescould mean that Q2 growth figures won't be as rosy as some had been expecting.

"Today's report suggests some early downside risk to our previous assumptions and to our forecast that GDP will increase by 2.0 per cent[annualized] in the second quarter of 2015, following the disappointing 0.6 per centdecline recorded in the first quarter," he wrote in a commentary.

Several economists expect the Bank of Canadato downgrade its Q2 GDP forecast next month. It hadearlier projected 1.8 per cent annualizedgrowth in the second quarter.

TD senior economist Randall Bartlett stillsees a positiveQ1GDP number, pointing out that until this report, most of the economic data in the second quartersuch asinternational trade, employment, and housing market activityhad been positive.

"Pullingtogether the available data so far in the quarter, real GDP growth appears likely to be in the neighbourhood of 0.5 per cent to 1.0 per cent (annualized) this quarter not great, but still positive."