By Akhil Shah

OTTAWA (MNI) – Canada October manufacturing sales were slightly
weaker than analysts had expected, but not enough to lead them to change
their overall GDP growth expectations for the fourth quarter centered
around 2%.

Statistics Canada reported earlier Wednesday that manufacturing
sales fell 0.8% to C$48.7 billion in October, following three
consecutive monthly increases.

Leslie Preston, an economist at the Toronto Dominion bank, wrote in
a commentary that “the decline in real terms is a negative for October
GDP, and evidence that the recent healthy pace of growth for
manufacturing is unlikely to be sustained in the fourth quarter.”

That said, the weak number should not impact her fourth quarter GDP
forecast of 2.0%, she told Market News International.

Nor did the Royal Bank of Canada change its expectation of a 2% GDP
growth this quarter based on Wednesday’s data.

Paul Ferley, assistant chief economist at the Royal Bank of Canada,
wrote in a note earlier, “the drop in manufacturing sales on a volumes
basis is one factor behind our expectation that October GDP will likely
show unchanged activity in the month. This in turn lies behind our
forecast that, after a 3.5% annualized jump in third-quarter 2011 GDP,
growth is likely to moderate to 2.0% in the fourth quarter.”

“With the momentum in exports and manufacturing fading in the final
quarter of the year, we expect Canada’s rate of expansion to cool to a
still-solid 2% in the October-December period,” TD Bank said in a
report.

BMO was less optimistic with a 1.5% fourth quarter GDP forecast
that was unrevised following the October manufacturing sales report.

While the 0.8% slide in manufacturing activity was a bit larger
than expected, it should not come as a surprise after exports retreated
3.0% over the month.

Besides, even after sliding 0.8% in October, sales remained second
highest of any month in 2011, coming in just behind September (C$49.054
billion).

Looking ahead, momentum is expected to decelerate after Statistics
Canada reported unfilled orders and new orders fell 0.3% and 4.7%
respectively in October. The industry is also expected to come under
pressure after it shed 79,200 jobs from September to November.

Global economic growth is expected to weather a tough time in the
months ahead, especially with emerging market growth being stifled with
the ongoing European crisis. A possibility of the Eurozone heading for
another recession cannot be ruled out with the economic activity losing
steam.

However, some respite can be taken from the current indicators
released in the U.S. which came in better than expected.

— Akhil Shah is a reporter with Need To Know News

** Market News International – Ottawa **

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