DAILY NEWS Sep 2, 2014 10:14 AM - 0 comments

Canada's manufacturing sector gains momentum in August, capping 9 months of growth

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2014-09-02

Toronto – August 2014 data pointed to a robust upturn in the performance of the Canadian manufacturing sector, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI), with overall business conditions improving at the fastest pace since November 2013. A monthly survey, conducted in association with Markit, a 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 Canadian Manufacturing PMI registered 54.8 in August, up from 54.3 in July and comfortably above the neutral 50.0 value. The latest reading was the highest for nine months and indicated a robust improvement in overall operating conditions across the manufacturing sector.

Output and new business growth both accelerated during August, while job creation picked up markedly to its strongest for 11 months. Meanwhile, cost pressures subsided to their weakest so far this year, which contributed to a further moderation in factory gate price inflation during the latest survey period.

“The momentum in Canada’s manufacturing sector is clearly being sustained with the index registering the ninth consecutive month of improvement,” said Craig Wright, senior vice-president and chief economist, RBC. “We expect that Canadian manufacturers will continue to directly benefit from the strengthening US economy, which has made and will continue to make positive strides.”

The headline RBC PMI reflects changes in output, new orders, employment, inventories and supplier delivery times.

Expansion of production

Canadian manufacturers signalled a robust and accelerated expansion of production levels in August, thereby extending the current period of growth to 16 consecutive months. Moreover, the latest increase in output levels was the fastest since last November.

A strong pace of new order growth helped support rising production volumes during August, with the latest increase in new work being the steepest since November 2013. Anecdotal evidence cited stronger domestic spending patterns during the latest survey period, alongside a boost to order books from higher export sales. August data pointed to the most marked increase in new work from abroad since March, with a number of manufacturers attributing the rise to greater spending by clients in the US.

Job creation

A sustained improvement in new business inflows continued to encourage job creation across the manufacturing sector in August. The latest survey highlighted that employment numbers rose for the seventh month in a row, and at the strongest rate since September 2013. In turn, increased staffing levels helped slow the pace of backlog accumulation at manufacturing companies in August.

Greater production schedules resulted in a robust expansion of input buying within the manufacturing sector during August. Pre-production stocks were accumulated for the first time in four months, while finished goods inventories were depleted at a marginal pace. Strong demand for raw materials contributed to a further lengthening of suppliers’ delivery times in August.

August data provided positive news on the inflation front, with average input prices increasing at the slowest pace since December 2013. Reduced cost pressures in turn contributed to the weakest rise in factory gate charges for nine months.

Regional highlights

Alberta and British Columbia recorded the sharpest improvement in business conditions. Manufacturing employment numbers continued to increase in all four regions. New export order gains were strongest in Alberta and British Columbia, followed by Ontario. Input cost inflation eased in all four regions during August.

“August’s survey provides an upbeat assessment of the Canadian manufacturing sector,” said Cheryl Paradowski, president and chief executive officer, SCMA. “Sustained output growth is driving a strong improvement in underlying business confidence, and in turn bolstering manufacturing job creation. There are signs that the resurgent US economy is having an appreciable impact on export sales, as Canadian manufacturers saw one of the fastest rises in new orders from abroad so far this year.”



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