Canadian Factory Sales Increase

Canadian machinery factory sales rose twice as much as expected in July, making a recession look less likely as the economy shows signs of picking up in the third quarter after an unexpected slump in the second.
Sales jumped 2.7% in the month to $46.7 billion following three straight months of declines and beating estimates of a 1.3 percent gain, Statistics Canada said on Thursday.
Sales in constant dollars, used to calculate gross domestic product, rose 2.8 percent and shipments outside the auto sector were also encouraging, up 2.3 percent.
The Canadian dollar barely reacted to the news [ID:nS1E78E083] and economists cautioned that the widening European debt crisis and weak U.S. economy will keep Canadian economic growth modest, echoing comments made by Finance Minister Jim Flaherty on Wednesday.
After the economy shrank 0.4 %  annualized, in the second quarter due to supply disruptions resulting from the tsunami inJapan, most economists have expected a reversal of fortune in the third quarter although Scotiabank
Analysts surveyed by Reuters forecast the Bank of Canada will hold interest rates at an ultra-low 1 % at least until the third quarter of 2012, although markets are still pricing in a rate cut as the bank's next move.
Canada's oil industry was the biggest contributor to the machinery manufacturing gains as some refineries ramped up production after maintenance work, boosting sales in the petroleum and coal products industry by 6.1% in July.
Primary metals and fabricated metal products also noted hefty gains. All in all, 15 of 21 industries representing about 75 % of total machinery manufacturing capacity reported higher sales.
New orders in July rose 1.3 %, driven by the metals, machinery and energy sectors. Unfilled orders in July rose to their highest level in more than two years and inventories edged 0.1% lower, the first decline since September 2010.