New business levels increased across the manufacturing sector in October, with the sharpest rate of expansion in nearly a year
TORONTO—Business conditions across the Canadian manufacturing sector showed a robust rebound in October, 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).
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 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 U.S. economy should continue to support Canadian exports going forward.”
The headline RBC PMI reflects changes in output, new orders, employment, inventories and supplier delivery times. Key findings from the October survey include:
New business levels increased across the manufacturing sector in October, with the sharpest rate of expansion in nearly a year. Anecdotal evidence linked improved sales volumes to new product launches, successful marketing initiatives and competitive pricing strategies. In spite of these factors, volumes of new export business increased marginally in October, and the rate of expansion was subdued in comparison to the average since the survey began in late-2010.
Sustained output and new business growth contributed to a solid increase in manufacturing employment levels. The rate of job creation eased slightly during October, but remained close to August’s 11-month high. Meanwhile, backlogs of work were accumulated for the ninth consecutive month and at the sharpest pace for three months.
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 16th 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: