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Canada: Manufacturung sales pose upside risk to Q3 GDP - RBS

FXStreet (Bali) - Brian DePratto, Economist at TDS, shares his thoughts on the latest manufacturing sales data out of Canada, which grew 2.5% in July, well above the consensus expectation of +1%.

Key Quotes

"Canadian manufacturers started the third quarter with a bang. At face value it may be tempting to dismiss the strong month due to one-time factors in Ontario's automotive manufacturing sector.'

"However, the forward looking components of the report suggest that this may be rash: a drop in the stock-to-sales ratio, alongside the strong rise in new orders, suggests underlying strength in demand for manufactured goods."

"What's more, the breakdown of real vs nominal shipments in July also paints a positive picture, with sales led by growth in volumes, rather than prices."

"Tuesday's strong manufacturing sales data suggests strong underlying demand entering the third quarter. The strong pace of growth seen in Q2 may be thus be sustained, or even outpaced in the third quarter."

"As a result, we are expecting real GDP growth of around 3% in Q3, with notable upside risk."

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