Canadian manufacturing sales fell 1 percent to C$49.9 billion (US$38.6 billion) in May, the third decrease in five months. The decline in May reflected lower sales of motor vehicles and petroleum and coal products.

Sales fell in 15 of 21 industries, representing nearly 70 percent of total Canadian manufacturing.

Constant dollar sales were down 2.1 percent, indicating that a lower volume of manufactured goods was sold in May.

Motor vehicle sales fell 4.2 percent to C$5.6 billion (US$4.3 billion) in May, while sales of motor vehicle parts declined 2.3 percent. The declines in both industries were partly as a result of supply interruptions associated with the earthquake in Japan in April.

Sales in the petroleum and coal products industry were down 2.2 percent to C$4.1 billion (US$3.2 billion) in May, following gains in March and April. The decline was entirely attributable to lower volumes of product sold, as prices for the industry rose 6.4 percent, according to the Industrial Product Price Index. The decrease in volumes partly reflected the effect of the Fort McMurray wildfire and evacuation. Maintenance and turnaround work at some facilities also lowered sales.

The fabricated metal product (-2.7 percent), computer and electronic product (-6.4 percent), and primary metal (-1.6 percent) industries were also down.

Partially offsetting these declines was a 4.6 percent advance in production in the aerospace product and parts industry. Gains were widespread in the aerospace industry and were partly due to the increase in the value of the U.S. dollar relative to the Canadian dollar. Inventories are used to calculate production in the aerospace industry and most inventories in the industry are held in US dollars.

Sales of plastics and rubber products (+3.2 percent), food (+0.8 percent), and wood products (+2.6 percent) also rose in May.

Wood product manufacturing rose for the 7th time in 10 months in May, with sales 16.2 percent higher than in the same month the previous year, partially reflecting a 2.7 percent increase in prices.

Sales were down in five provinces in May, with Ontario registering the largest decline.

In Ontario, sales dropped 1.4 percent to C$24.5 billion (US$18.9 billion), reflecting lower sales in 13 of 21 industries. Three-quarters of the provincial decline was attributable to a 4.5 percent decrease in motor vehicle sales. Sales in the motor vehicle parts industry were down 2.4 percent to C$2.3 billion (US$1.8 billion). Lower sales in the chemical industry (-3.7 percent) and the computer and electronic product (-5.8 percent) industry also contributed to the provincial decrease.

Manufacturing sales in Alberta fell 2 percent in May to C$5 billion (US$3.9 billion), following two consecutive monthly gains. A 12.2 percent drop in the petroleum and coal product industry, partly reflecting the effect of the Fort McMurray wildfire and evacuation, was the main contributor to the provincial decline. Lower non-metallic mineral product sales (-16.1 percent) also contributed to the decline. A 5.4 percent rise in the chemical industry and a 6.2 percent gain in the wood product industry partly offset these decreases.

In British Columbia and Nova Scotia, sales were up in both the durable and non-durable goods industries, offsetting a small portion of the overall national decline.

Inventories fell for the fourth consecutive month, down 0.2 percent to C$70.7 billion (US$54.6 billion) in May, the lowest level since December 2014. Inventories were down in 12 of 21 industries. Petroleum and coal recorded the largest decrease, with inventory levels down 3.8 percent. Lower inventories in the primary metal (-0.3 percent) and motor vehicle (-0.8 percent) industries also contributed to the overall decrease. These declines were partly offset by higher inventories of food products (+0.5 percent).

The inventory-to-sales ratio rose from 1.41 in April to 1.42 in May. This ratio measures the time in months that would be required to exhaust inventories if sales were to remain at their current level.

Unfilled orders rose for the second consecutive month, up 1.3 percent to C$88.8 billion (US$68.6 billion) in May as a result of a gain in the aerospace product and parts industry.

Unfilled orders in the aerospace industry rose 2.8 percent to C$49.4 billion (US$38.2 billion). The gain was attributable to the increase in the value of the U.S. dollar relative to the Canadian dollar during the month. The majority of unfilled orders in the industry are held in US dollars.

New orders rose 0.3 percent, as a result of growth in the aerospace product and parts industry.

When collecting data for the May reference month, the Monthly Survey of Manufacturing added three supplementary questions to a national sample of about 3,600 respondents to assess the effect of the Fort McMurray wildfire that started in early May.

Overall, 5.4 percent of the sample or 194 manufacturers, reported that their business activities in May were affected by the wildfire and evacuation in the Fort McMurray area. Out of these 194 respondents, approximately 40 percent reported a loss of sales in terms of percentages and/or dollar values. The remaining 60 percent indicated that they were affected, but were not able to quantify the effects of the fire. Several manufacturers in the wood product industry noted an increase in their sales, in anticipation of rebuilding. This gain was very small compared with sales in the industry as a whole.

The responses to the supplementary questions indicated that the wildfire and evacuation were partly responsible for lower sales in the petroleum and coal product industry in May. National sales in the industry were down 2.2 percent, despite a 6.4 percent gain in prices, as measured by the Industrial Product Price Index.

For the rest of the manufacturing sector, some manufacturers, primarily in Alberta and Ontario, reported lower sales as a result of the wildfire and evacuation. In Alberta, 70 respondents to the supplemental questions indicated that they were affected, reflecting the fact that many manufacturing firms in the province supply machinery and equipment to the oil and gas extraction sector.

Meanwhile, 48 manufacturers in Ontario indicated that they were affected as well. Ontario manufactures numerous products for the oil and gas extraction sector in Alberta. Effects were also reported in British Columbia (27 respondents), Saskatchewan (17 respondents) and Manitoba (12 respondents).

Respondents in Quebec and the Atlantic provinces reported relatively fewer effects. It is difficult to determine the overall effect of the wildfire and evacuation on manufacturing sales and inventories in dollar terms given that 60 percent of respondents who specified that their firm was affected did not quantify the impact.