Purchasing managers’ index for Canadian manufacturing highest for any quarter since Q1 2011
Toronto – Canadian manufacturers pointed to a further robust improvement in business conditions across the sector in November 2014, supported by strong increases in output and new order volumes, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI). Moreover, the latest survey highlighted a sharp rebound in export sales, with incoming new business from abroad rising at the fastest pace since September 2013.
A monthly survey, conducted in association with Markit, a leading 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.
At 55.3 in November, the seasonally adjusted RBC Canadian Manufacturing PMI held steady from October’s 11-month peak and remained above the neutral 50.0 threshold for the twentieth consecutive month. As a result, the headline index signalled a robust overall improvement in manufacturing conditions in November. Moreover, the average PMI reading for Q4 so far of 55.3 is the highest for any quarter since Q1 2011.
“The latest RBC PMI data shows continued strength in the manufacturing sector led by increases in output and employment. New export orders recorded a strong jump in the month, pointing to continued support from a stronger US economy and a more competitive Canadian dollar,” said Craig Wright, senior vice-president and chief economist, RBC. “This trend is expected to continue with additional support for the manufacturing sector coming from lower energy and transportation costs.”
Canadian manufacturers pointed to a further robust improvement in business conditions across the sector in November, supported by strong increases in output and new order volumes. Moreover, the latest survey highlighted a sharp rebound in export sales, with incoming new business from abroad rising at the fastest pace since September 2013. Meanwhile, input price inflation continued to soften in November, as manufacturers signalled that lower fuel and transportation costs helped offset rising prices for imported raw materials.
November data indicated a strong and accelerated expansion of Canadian manufacturing production. The latest upturn in output volumes was the fastest for three months and much stronger than the average seen since the survey began in late 2010. New order volumes also increased at a robust pace in November, with the rate of growth easing only slightly from October’s 11-month high. A number of survey respondents commented on improving demand from export clients, especially those based in the US The latest upturn in overall new business from abroad was the steepest for just over a year.
Higher levels of new work resulted in some pressures on operating capacity across the Canadian manufacturing sector in November. Volumes of unfinished business have now increased for 10 consecutive months, but the rate of backlog accumulation eased slightly since October. Survey respondents also noted that greater workloads and optimism towards the business outlook supported job creation at their plants in November. Latest data signalled the fastest rate of manufacturing employment growth since August.
Stocks of finished goods decreased during November, with the rate of decline the most marked for almost a year-and-a-half. Some manufacturers attributed the fall in post-production inventories to stronger than expected sales.
Improving demand conditions encouraged manufacturers to boost their pre-production stocks in November, which underpinned a further robust increase in input buying. Meanwhile, input cost inflation eased to a 12-month low in the manufacturing sector, leading to the slowest rise in factory gate charges since August 2013.
“A strong upturn in export sales underpinned the latest improvement in Canadian manufacturing business conditions” said Cheryl Paradowski, president and chief executive officer, SCMA. “Manufacturers are benefiting from the weaker exchange rate, improving US economic conditions and increased success in exporting to new markets. Supply chain strains remained prevalent in November and manufacturers noted that imported raw material costs were again on the rise. However, lower fuel and transportation costs helped alleviate inflationary pressures across the manufacturing sector, with the overall pace of input price inflation the lowest for a year.