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RBC PMI shows slower manufacturing growth rate in July

The volume of new orders received by Canadian manufacturers rose in July


August 1, 2012
by Purchasing b2b staff

TORONTO: After registering strong growth in May and June, Canada’s manufacturing sector slowed to a four-month low in July, according to the RBC Canadian Manufacturing Purchasing Managers Index (RBC PMI), a monthly survey, done with Markit, a financial information services company and PMAC.

The headline RBC PMI—a composite indicator designed to provide a single-figure snapshot of the manufacturing sector—signalled a solid improvement in Canadian manufacturing business conditions during July. However, at 53.1, down from 54.8 in June and below the series average of 54.2, the headline index indicated the weakest improvement since March.

The index found the volume of new orders received by Canadian manufacturers rose in July, with this generally linked to greater client demand. New orders, as well as output, grew at sharply reduced rates compared to June. Employment increased at the slowest pace since April, though the rate of job creation remained solid overall, while the average price paid for inputs fell for the first time since October 2010.

The survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times. Key findings from the July survey include:

  • New orders and output grow, albeit at sharply reduced rates;
  • Solid increase in headcounts, but rate of job creation at three-month low; and
  • Average input costs fall for first time in 22-month series history.

The volume of new orders increased in July, continuing the trend that has been recorded in each month since the inception of the survey. About 32 percent of firms reported an increase in new work, with this generally linked to greater client demand. However, new export orders rose only marginally, partly reflecting weakness in the global economy. Subsequently, total new work intakes grew at a sharply reduced rate during the latest survey period.

Reflective of the rise in new orders, production increased further during July. Output growth was the slowest in four months. Meanwhile, firms depleted their stocks of finished goods, with a number of companies using existing inventories to fulfill some new order requirements. Backlogs of work fell for the second month running and to a greater extent than in June.

Manufacturers raised their purchases and increased their input inventories in July. Firms have accumulated stocks of purchases for four months running, but the latest increase was the weakest in this sequence. Suppliers’ delivery times lengthened further during July. Panellists suggested that vendors struggled with capacity issues. The latest increase in lead times was moderate, but to a lesser extent than in the previous survey period.

Employment in Canada’s manufacturing sector rose for the sixth consecutive month in July. Approximately 21 per cent of firms hired additional staff since June, largely citing the increase in production. Although remaining solid, the rate of job creation nonetheless slowed to a three-month low.

The average price paid for inputs fell for the first time in the 22-month series history during July, albeit marginally. Survey respondents reported lower prices for raw materials such as steel and resin. Output charges meanwhile rose for the fourth consecutive month in July, but the increase in selling prices was the weakest in the current sequence of inflation. Regional highlights include:

  • Manufacturing operating conditions improved in all four Canadian regions in July. Quebec posted the strongest month-on-month improvement, while the weakest was reported in Ontario.
  • The volume of new orders received by manufacturers based in Ontario was unchanged from that recorded one month previously, but growth was recorded elsewhere.
  • Staffing levels increased in all four regions during July. The weakest rate of job creation was reported in Ontario.
  • July data indicated that average input costs fell in three regions. The only exception was Alberta & British Columbia, which saw a slight increase.