Toronto – Business conditions across the Canadian manufacturing sector showed a robust rebound in October 2014, led by the fastest upturn in new order volumes since November 2013. As a result, production levels increased at an accelerated pace and manufacturing firms continued to boost their payroll numbers, 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 RBC Canadian Manufacturing PMI registered 55.3 in October, up from 53.5 in September and above the neutral 50.0 value for the nineteenth consecutive month. The latest reading pointed to the strongest improvement in overall business conditions since November 2013.
“We saw a strong uptick in Canada’s manufacturing business conditions in October, driven by new order growth,” said Craig Wright, senior vice-president and chief economist, RBC. “Despite the challenges we are seeing in the European and emerging markets, the continued recovery of the US economy should continue to support Canadian exports going forward.”
The latest survey highlighted ongoing supply-chain pressures across the manufacturing sector, in part reflecting a further robust increase in purchasing activity. Delivery times from vendors lengthened for the sixteenth successive month in October, with the latest deterioration of vendor performance the sharpest since April.
Supply chain bottlenecks encouraged some firms to build up their stocks of inputs in October, resulting in the most marked increase in stocks of purchases since May 2012. Meanwhile, inventories of finished goods were depleted for the fourth consecutive month.
Despite strong domestic demand for inputs and reports of upward pressure on costs from exchange rate depreciation, October data indicated a further moderation in overall purchase price inflation. Moreover, the latest rise in average cost burdens was the slowest recorded in 2014 to date. This in turn contributed to softer factory gate price inflation during October. Slower rises in manufacturing output charges have now been recorded in each of the past five months, driven by strong competition for new work and weaker underlying cost pressures.
Regional highlights include:
– Ontario recorded the sharpest expansion of manufacturing production
– All regions posted increased employment levels, led by Alberta and British Columbia
– Alberta, British Columbia and Ontario registered stronger order inflows from abroad, contrasting with declines in Quebec and the rest of Canada.
“Canada’s manufacturing sector looks to have regained momentum at the start of the fourth quarter” said Cheryl Paradowski, president and chief executive officer, SCMA. “Business conditions improved at the fastest pace for almost a year, highlighting that the sector is showing resilience in the face of subdued demand across the euro area and emerging markets. Solid job creation was maintained during October, but supply-chain pressures remain a concern as the latest survey indicated a steep and accelerated deterioration in suppliers’ delivery times.”