A new report on manufacturing suggests the Canadian economy rebounded in March, reversing the previous month’s surprising contraction and pointing to a resumption of modest growth.

Statistics Canada said Wednesday that factory shipments rose by a bigger than expected 1.9 per cent to $49.7 billion during the month after two consecutive declines.

The robust report — the biggest gain since last September — also included strong future indicators as new orders were also up by two per cent.

“Not much to rant about with this report,” said economist Jimmy Jean of Desjardins Securities. “While it is still early to pinpoint March GDP (gross domestic product), this gain supports the view for a strong rebound during the month.”

Given that Canada’s GDP contracted by 0.2 per cent in February, analysts said it is still unlikely the economy will meet the Bank of Canada’s call for a 2.5 per cent gain for the first quarter of 2012, but the bounce-back does show the economy began growing again.

Statistics Canada had earlier reported that March also saw a rebound in job creation with the addition of 82,300 new jobs, followed by 58,200 in April. The agency will report the GDP numbers for March and the first quarter at the end of the month.

The Canadian number was matched by a consensus-beating U.S. report showing industrial production south of the border rose by 1.1 per cent in April, the strongest month in about a year and a half.

As well, U.S. builders broke ground on an annualized seasonally 717,000 homes in April, an indicator America’s battered housing market may be on the mend.

“Looking ahead, we anticipate that stronger U.S. demand will be the driving support for the (manufacturing) sector,” said TD Bank’s Francis Fong.

“However, there is no shortage of challenges and risks. With Europe struggling to contain its sovereign debt crisis, exports to the region have fallen substantially since late last year. In addition, the high Canadian dollar remains an ever present hurdle for Canadian manufacturers.”

A new report from the Institute for Research on Public Policy suggests the strong dollar has negatively impacted 25 per cent of total factory output, mostly in small, labour-intensive industries such as textiles and apparel.

The report, which attempts to debunk the notion that Canada’s increased reliance on oil exports is hollowing out Central Canada’s manufacturing base — a phenomenon known as Dutch disease — concludes that cyclical factors and global competition is mostly to blame for the decline in factory production in Canada over the past decade.

The issue was given great impetus last week after NDP leader Thomas Mulcair blamed Alberta’s oilsands for some of the difficulties facing manufacturers.

March’s rebound doesn’t settle the question, but suggests the recent softness was due to temporary factors.

Statistics Canada said sales in March rose in 13 of 21 industries and in seven of 10 provinces, representing just over three-quarters of the manufacturing sector.

Sales of petroleum and coal products increased 4.5 per cent to $7.5 billion — the highest level since July 2008 — mainly due to higher sales volumes at many oil refineries.

In the chemical industry, sales rose 3.2 per cent to $3.9 billion, with most manufacturers reporting higher sales.

Transportation also bounced back strongly from a week February, with motor vehicle sales rising 2.3 per cent and aerospace by 9.9 per cent.

Canada booked its best two-month employment gain in three decades with news Friday that the economy churned out 58,200 new jobs in April, the strongest signal in some time the economic recovery may be coming out of a mid-winter stall.

The report was far stronger than anyone anticipated with Canadians able to find net new jobs in seven provinces across the country, many full-time and in the high-paying manufacturing, construction and resource industries.

Combined with March’s 82,300 jobs number, the 140,500 total is the best two-month employment performance the country has seen since 1981.

While welcoming another strong report, politicians and economists invoked caution about what the job creation numbers mean for the economy going forward.

“The job numbers ... are actually very good,” Prime Minister Stephen Harper said at an event in Edmundston, N.B.

“But I don’t want us to become complacent. We watch these numbers every month carefully and there’s lots of fluctuation, and the whole economy all around us remains very challenging, especially in Europe.”

Finance Minister Jim Flaherty echoed the sentiment, saying the global recovery remains “very fragile.”

Bank of Montreal economist Doug Porter said the Canadian data suggests the country is a kind of island of tranquility in a sea of turbulence, noting that while jobs climbed in Canada, the U.S. had shown signs of losing momentum and Europe slipped back into political and economic turmoil.

The only negative was that the unemployment rate edged up one-tenth of a point to 7.3 per cent. But Statistics Canada said that was because even more people went looking for work last month — a signal of labour market strength rather than weakness.

“Wow. Where did this come from?” Porter said.

“(This) doesn’t seem to jibe with very much else in the economy, but maybe this was a case of things being understated in prior months and now we’re getting catch-up.”

Analysts said the data presents Canadians with two separate pictures of the economy, given that prior to March, employment had been mostly flat going back to the summer.

Either job creation truly was stalled only to rebound with a vengeance as spring approached, or Canada had been experiencing moderate employment growth all along, a reality that was only captured in the household labour survey in the past two months.

Coincidentally, Statistics Canada’s less timely and lesser-known employers survey had been reporting steady growth throughout the fall and early winter, when the more well-known household survey was showing flat or falling numbers.

And with April’s numbers, the two surveys now appear to be in sync — both now show a 1.2 per cent job growth over the past year, although the employers’ survey is only to February.

Either way, the numbers point to an economy that continues to distance itself from the wreckage of the 2008-09 recession, although at a moderate rate, said analysts.

“With this report, the lull of last winter has been all recovered and employment is right back to its trend. Thus, further improvements of this size are highly unlikely,” said Jimmy Jean, economic strategist with Desjardins Economic Studies.

The jobs trend, if confirmed in subsequent months, could give the Bank of Canada more impetus to start hiking interest rates, as governor Mark Carney suggested last week.

But many economists still believe Carney will remain on the sidelines throughout 2012, given that the global environment is if anything worsening, particularly in Europe, and risks are rising.

The markets saw the report as positive, with the Canadian dollar leaping past parity on the morning opening, rising 0.31 of a cent to 100.14 cents US.

As impressive as April’s headline jobs number was — the details were stronger.

Unlike the previous month, when most of the new jobs were concentrated in Central Canada, this time the gains were spread across the country with employment rising in the Atlantic region, Quebec and the West — although Ontario, Nova Scotia and Manitoba missed out on the action with minor job losses.

Also impressive was that most new workers were full-time and all were in the private sector, as well as being new hires rather than in the softer self-employment category.

In fact, the number of employees rose by 66,600, more than making up for a small loss of self-employed workers, and the private sector added 85,800 as government jobs fell by 19,200.

Over the past year, Canada has added 214,000 new jobs, more than half in the last two months.

By industry, Statistics Canada said construction added the most workers, 24,600, followed by manufacturing, 23,800 — welcome news in an export-dependent sector that has been struggling due to weak foreign markets and the high Canadian dollar.

Other gainers in April included natural resources, 11,000; agriculture, 10,000; and education services, 17,000.

Offsetting the gains, public administration shed 32,400 workers, likely an indication of government restraint.

Although Canada’s unemployment rate at 7.3 per cent is still more than a full point above pre-recession levels, Statistics Canada inserted a historical note to show how much better Canada’s labour market has fared since the recession and in the past decade compared to the United States.

From the early 1980s until 2008, Canada’s unemployment rate was consistently higher than south of the border, it notes. But since 2009, the Canadian rate has been about 2.5 percentage points lower on average.

As well, Canada now has a greater number of workers as a percentage of the working-age population than the U.S., a reversal of pattern than existed prior to 2002.

“In April, the employment rate was 62.6 per cent in Canada when adjusted to the U.S. concepts,” the agency said. “This was 4.2 percentage points higher than the comparable rate of 58.4 per cent in the United States.”

Canada’s economy started off the year on positive, if tentative, footing in January, registering a modest 0.1 per cent gross domestic product gain after the strong handoff from the end of year.

The increase matched expectations, although markets were pleasantly surprised by an upward revision of a tenth of a point for the December reading to 0.5 per cent.

Analysts were initially mixed on the portents going forward, with some expecting better results in upcoming months.

“It was weaker, but if you take the last two months together and average them up, you get an economy growing by 0.3 per cent monthly and that’s actually a solid performance,” said TD Bank chief economist Craig Alexander.

Alexander said January’s GDP reading doesn’t change his view of the economy for the year. He recently upgraded his outlook for the year to 2.2 per cent growth, up half a point from his December estimate, mostly because of the good news coming out of Europe and the uptick in the United States.

Scotiabank’s Derek Holt, however, worried about the softer details in the report, with key sector such as mining and oil extraction, forestry and fishing, construction and public administration falling back.

The biggest contribution came from surprising strength in utilities and manufacturing, particularly auto production.

Some of the setback in key sectors may have been due to temporary factors. Statistics Canada cited the Rio Tinto aluminum smelter lockout in Alma, Que., as contributing to the decline in primary metal sales. The Caterpillar lock-out former Electro Motive employees at London, Ont., also likely played a role, said Erin Weir, an economist with the United Steelworkers union.

In the details of the Statistics Canada report, manufacturing rose 0.7 per cent in January, a fifth-straight monthly increase.

Production of durable goods rose 0.8 per cent with higher output of fabricated metal products, transportation equipment and wood products.

There were also increases in the finance and insurance sector, utilities, wholesale trade, some tourism-related industries and the public sector.

Decreases were recorded in forestry and logging, arts, entertainment and recreation as well as in construction.

Oil and gas extraction declined 0.9 per cent as a notable drop in natural gas extraction outweighed a gain in crude petroleum production.

Production of non-durable goods advanced 0.6 per cent on the strength of chemical and food production.

The finance and insurance sector rose 0.4 per cent, mainly as a result of an increase in management activity for mutual funds, residential mortgages and business loans.

Wholesale trade increased while retail trade was flat.

Labour productivity at Canadian businesses grew faster than at their U.S. counterparts last year for the first time since 2006, according to Statistics Canada.

The report came the same day jobs data from both countries indicated the U.S. added jobs in February, while the number of Canadian jobs contracted, suggesting Canada may be replacing jobs gains with productivity, while the opposite is true south of the border.

After posting a better-than-expected 0.7 percent gain in the fourth quarter of 2011, Canadian business productivity for the full year was up 0.8 percent, slowing from the 1.5 percent gain in 2010, Statistics Canada said.

Growth in labour productivity - a measure of real GDP, or output, per hour worked - was weaker south of the border.

After a slight increase of 0.2 percent in the fourth quarter, productivity gains at American businesses came in at a 0.2 percent, down from four percent in 2010.

"This is the first time since 2006 that productivity has grown faster in Canada than in the United States," Statistics Canada said in the release.

The difference in productivity was largely based on a difference between growth in real GDP of businesses since the two countries saw similar increases in hours worked, Statistics Canada said.

The report on Canadian productivity helped to buffer against pessimism on the labour front after Statistics Canada's February jobs report indicated that businesses are reluctant to hire.

Jobs creation last month fell short of expectations with 2,800 positions lost in the month, continuing a trend of disappointing numbers since the summer.

"Just 90 minutes after reporting another modest jobs decline, Statistics Canada delivered vivid evidence that Canada's recovery may now be relying more on brains than brawn," said Douglas Porter, deputy chief economist at Bank of Montreal.

But the productivity report indicates labour performance may finally be turning the corner after a lacklustre stretch in the middle of the recovery, Porter said.

"The much more positive counterpoint to the recent run of soggy Canadian jobs data in recent months is that labour productivity is finally showing some life."

The jobs outlook was much more optimistic in the U.S., where employers added 227,000 jobs in January to complete three of the best months of hiring since the recession began.

"While Canadian productivity growth in the past year has been no better than the long-term average, it looks to be gaining some momentum even as previously red-hot U.S. productivity is cooling," Porter said. "It truly appears like the Canadian and U.S. recoveries are trading places - Canada exiting strong jobs/weak productivity, and the U.S. leaving weak jobs/strong productivity."

In Canada, the fourth-quarter productivity report was not all rosy for Canadian businesses as hours worked fell - amid the jobs decline - in the most recent quarter for the first time in more than a year.

The gain in productivity, compared to a 0.6 percent rise in the third quarter, came as business output continued to grow, but at a slower pace than in the previous quarter, the agency said.

GDP growth at businesses was 0.5 percent, less than half the growth rate posted in the previous quarter.

The main reason for the slower pace of output was a slowdown in mining and oil and gas extraction, wholesale trade, construction and finance and insurance services.

Meanwhile, hours worked fell 0.2 percent after rising in the previous four quarters.

The fall in working hours came mostly from the construction, wholesale trade, and professional, scientific and technical services sectors.

Still, both goods-producing and services-producing businesses contributed to the overall productivity gain.

Productivity at goods-producing businesses was up 1.1 percent, largely as a result of gains in manufacturing and construction.

In the services-producing sector, productivity grew 0.5 percent, bouncing back from two consecutive quarterly declines. Professional, scientific and technical services, retail trade, and other services contributed most.

OTTAWA — Canada’s factories were humming in November, a strong signal for the economy and jobs, and suggesting the battered manufacturing sector may have more life than previously thought.

Statistics Canada said Thursday that manufacturing sales rose an above-consensus two per cent to $49.6 billion during the month — the fourth increase in five months — as output in machinery, petroleum and coal products, and motor vehicle industries posted strong gains.

In real terms, manufacturing sales were up 1.7 per cent.

Analysts had expected factory activity to taper off in the final months of 2011 due to the slowdown in the global economy and because of the unsustainable 14 per cent pop in the third quarter, which was mostly make-up for supply-chain disruptions in the spring.

But on an annualized basis, October and November combined show an additional seven per cent gain in terms of volumes, which bodes well for growth in the fourth quarter.

This week, the Bank of Canada upgraded its growth prediction for the final three months to two per cent from 0.8, but even that revision may not be adequate to cover the contribution of the key factory sector.

“I, like the Bank of Canada and a number of others, have bought into the argument that we’ve lost trade competitiveness with the strength of the Canadian dollar and weak productivity, but at some point you’ve got to let the facts speak for themselves,” said economist Derek Holt of Scotiabank.

“The kind of gains we’re seeing in manufacturing should challenge that belief.”

The Canadian dollar climbed about a quarter of a cent to break through the 99-cent US barrier in morning trading.

David Madani of Capital Economics said it is still unclear how long this surprising strength can continue, and he noted that November’s output was partly based on unusual temporary factors.

The machinery industry reached its highest sales level ever in the month, as sales rose 13 per cent to $3.4 billion as a “number of companies completed large projects” in the mining, oil and gas field machinery industry, Statistics Canada noted.

Still, sales were up in 14 of 21 industries, representing approximately 80 per cent of Canadian manufacturing, the agency said.

Motor vehicle sales rose 7.1 per cent to $4.1 billion in November and have increased 25 per cent since their low point last June.

Holt said there is reason to believe the factory momentum could hold at least well into the first quarter of this year.

New orders climbed 3.6 per cent from the previous month, and are up 20 per cent from a year ago.

“That suggests it’s sustainable for a least a few months,” he said. Does it last beyond the first quarter is much more uncertain, he added.

Overall gains in November were somewhat offset by declines in the computer and electronic product industry, where sales were down 11.0 per cent to $1.2 billion. Inventory levels rose 0.4 per cent.

Manufacturing sales rose in nine provinces in November, with Ontario, Alberta and Newfoundland and Labrador posting the largest provincial increases in dollar terms.

OTTAWA — A new report shows real wages in Canada are plummeting, with weekly payroll gains falling to levels not seen since the recession.

Statistics Canada says average weekly earnings for non-farm payrolls actually fell 0.3 per cent in September, when compared with August, to $872.75.

On a year-over-year basis, the increase in earnings has dropped to 1.1 per cent from 12 months ago, the lowest pace of improvement since November 2009.

Analysts point out that in real terms Canadian wages are actually dropping, since the year-over-year increase is about one-third of the inflation rate.

Previous Statistics Canada reports highlight just how dramatically real wages have dropped in Canada in the last six months.

The increase in average weekly earnings was as high as 4.1 per cent in April, but has fallen steadily since.

CIBC economist Benjamin Tal says the trend is not a good omen for the economy because it means Canadians will have less disposable income to purchase goods.

OTTAWA — A big jump in oil and coal sales helped to boost Canadian manufacturing sales in September, hinting that economic growth could have edged slightly higher than expected in the third quarter of the year.

Statistics Canada said Tuesday that manufacturing sales were up 2.6 per cent to $49.2 billion in September, their third straight monthly increase. The gain largely reflected higher sales in the petroleum and coal products and transportation equipment industries.

Sales of petroleum and coal products rose 13.7 per cent to $7.6 billion, the agency said, their largest percentage increase since March 1999, while transportation equipment sales rose 7.1 per cent to $8 billion.

The gain was twice what economists had expected, CIBC World Markets economist Peter Buchanan wrote in a note to clients.

“Adjust for inflation, sales were up by 1.8 per cent from the prior month, capping a strong quarter for factory activity,” Buchanan wrote.

“Today’s number could imply some upside for our estimate of three per cent gross domestic product growth in Q3.”

Despite a global economic slowdown and the possible threat of a return to recession in Europe, where government debt crises are far from having been settled, September had seen incremental hints of strength in the Canadian economy.

Earlier this month, Statistics Canada reported a surprisingly strong expansion in exports that gave the country its first trade surplus in eight months.

Analysts said the rebound in exports, despite considerable headwinds from Europe and the United States, likely pushed the increase in Canada’s gross domestic product to about three per cent in the third quarter. That would be one point higher than the Bank of Canada’s recently revised call.

However, forecasts from global organizations such as the International Monetary Fund, as well as central banks, and private sector economists have all recently pointed to slower global and domestic growth.

Bank of Canada governor Mark Carney last month projected the economy would slow to sub-one per cent growth in the last three months of this year, half of the expected rate of the third quarter.

On Tuesday, Statistics Canada said higher September sales were reported in 10 of 21 industries, representing 60.5 per cent of total manufacturing, with a three per cent decline in food industry sales partially offsetting the gains.

Stronger manufacturing sales were reported in nine provinces, with Alberta, Quebec, New Brunswick and Ontario leading the way. New orders rose 4.8 per cent to $51.0 billion.

Statistics Canada reports business investment in plant and equipment continued its upward trend, rising 3.7 percent in the second quarter, a sixth consecutive quarterly increase. Machinery and equipment has contributed the most growth in overall investment in plant equipment in four out of six quarters.

Business investment in machinery and equipment expanded seven percent in the second quarter. Investment in industrial machinery increased 17 percent, largely as a result of the arrival of a natural gas platform.

Investment in computers and other office equipment also registered double-digit growth, up 13 percent in the second quarter. This was similar to the pace of growth recorded in the second and third quarters of 2010.

Business investment in non-residential structures increased 0.5 percent. This was a much slower rate of growth than in the previous five quarters. Business investment in engineering structures grew one percent, whereas investment in buildings declined 0.9 percent.

Imports of machinery and equipment recorded their eighth consecutive quarterly advance. The 6.6-percent increase in imports of machinery and equipment in the second quarter was partly the result of the import of a natural gas platform.
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