DAILY NEWS May 27, 2014 8:29 AM - 0 comments

April manufacturing survey points to further improvement in business conditions

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Toronto – April 2014 data pointed to another positive month for the Canadian manufacturing sector, with the latest survey pointing to higher levels of output, new business and employment, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI). A monthly survey, conducted in association with Markit, a global financial information services company, and the Supply Chain Management Association (SCMA), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian manufacturing sector.

Adjusted for seasonal influences, the headline RBC PMI registered 52.9 in April 2014, down slightly from 53.3 in March, but above the neutral 50.0 value for the 13th successive month. All five component indices had a positive influence on the RBC PMI in April. The drop in the index since March mainly reflected slower rates of output and new business growth.

Nevertheless, supply chain disruptions persisted, leading to longer delivery times and another rise in backlogs of work. Meanwhile, manufacturers noted that input costs were pushed up by the weaker Canadian dollar, which in turn contributed to a solid increase in factory gate charges during the latest survey period.

“Though we saw a slight dip in April, it is encouraging to see [that] Canada’s manufacturing sector continued to grow for what is now the 13th month in a row,” said Craig Wright, senior vice-president and chief economist, RBC. “Our bottom line continues to be that a strengthening US economy alongside a more competitive Canadian dollar will support improving conditions for Canada's manufacturers in the near-term.”

Manufacturers in Canada signalled that growth in production eased for the second month running in April and was slightly slower than the average since the survey began in late 2010. The moderation in output growth reflected a slight slowdown in the pace of new business expansion in April.

Volumes of new work from abroad increased only marginally in April and the rate of expansion eased over March. Companies that reported a rise in new export orders generally cited exchange rate depreciation and stronger underlying demand from the US.

Logistics bottlenecks

Delivery times from suppliers lengthened in April, which manufacturers attributed to logistics bottlenecks and, in some cases, ongoing disruptions from adverse weather conditions. The latest deterioration in vendor performance was one of the sharpest seen over the past two-and-a-half years. As a result, backlogs of work accumulated for the third month running and some manufacturers sought to increase their pre-production inventories in April. Stocks of finished goods also rose during the latest survey period.

Job creation

Greater production requirements and resilient confidence about the economic outlook supported job creation across the manufacturing sector. The latest rise in employment levels was the fastest since November 2013, but still slightly weaker than the historical average.

April data indicated a further sharp rise in average cost burdens within the manufacturing sector. The rate of input price inflation eased since March, but was still one of the fastest recorded over the survey history. Meanwhile, the latest survey pointed to a solid rise in factory gate charges, which extended the current period of output charge inflation to eight months. Manufacturers widely linked higher output prices to strong cost inflation in recent months.

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