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UPDATE 1-Canada Aug manufacturing shipments drop on autos
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OTTAWA, Oct 16 (Reuters) - Canadian manufacturing shipments in August dropped by 1.7 percent from July due to weak U.S. demand for motor vehicles and a slump in the volatile aerospace industry, Statistics Canada said on Tuesday.

The drop was steeper than the 1.0 percent decline forecast by market operators.

Statscan also said it had changed the way it calculated the data and put July's month-on-month increase at 1.3 percent. The initial figure had been a rise of 2.3 percent but officials said there was no correlation between the two sets of data.

Weak U.S. demand for motor vehicles knocked the transportation sector down 9.7 percent in August, erasing most of the 10.8 percent gain in July. Eleven of 21 manufacturing industry sectors, representing 56 percent of total sales, recorded falls.

"This report provides further evidence that the Canadian manufacturing sector continues to struggle as it navigates against the head winds coming from the stronger Canadian dollar and weaker demand from the U.S.," said Millan Mulraine of TD Securities.

"In fact, the 6.5 percent month-on-month decline in the three-month annualized trend (worse than the minus 4.5 percent recorded last month) is further evidence that the situation may have worsened somewhat during the month."

The Canadian dollar is trading at 30-year highs, putting pressure on the manufacturing sector, which has lost more than 71,000 jobs in the last year.

New orders fell 5.0 percent, largely due to a 50.2 percent slump in shipments by the volatile aerospace products and parts industry. The sector had recorded a 70.3 percent increase in July over June.

The manufacturing figures are compiled from a survey of 10,500 companies. Statscan said "to avoid long-term respondent fatigue," almost half the companies had been replaced by new ones and that it had revised seasonally adjusted data back to January 2001.

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