Business conditions improve in August: PMI

Manufacturing conditions improve across Canada, according to purchasing managers' index

September 2, 2011
by Purchasing b2b staff

Incoming new work for Canadian manufacturers increased at a marked pace during August, according to the RBC Canadian Manufacturing Purchasing Managers Index. The index is conducted each month with global financial information services company Markit and the Purchasing Management Association of Canada (PMAC).

The index found business conditions in Canadian manufacturing improved in August, supported by stronger increases in both output and new orders. Firms therefore hired additional staff to cope with the increase in workloads, the index said. Meanwhile, price pressures eased in August, with both input costs and output charges rising at slower rates.

At 54.9, up from 53.1 in July, the headline RBC PMI—a composite indicator that provides a single-figure snapshot of the health of the manufacturing sector—signaled an improvement in overall business conditions within the Canadian manufacturing sector in August. The index reading was the highest in four months, as output and new order levels grew at sharper rates during the latest survey period.

“Canadian manufacturers received a larger volume of new work in August with export orders recovering further from the dip recorded in June,” said Cheryl Paradowski, PMAC’s president and CEO. “The overall increase in new orders largely reflected greater demand and new client wins, and contributed to faster production growth. Meanwhile, panelists also recorded higher input prices, driven by increased costs for certain raw materials. That said, the rate of input price inflation has eased since July to the weakest in 2011 so far.”

In addition to the headline RBC PMI, the survey tracks changes in output, new orders, employment, inventories, prices and supplier delivery times. Index readings above 50.0 signal expansion from the previous month, readings below 50.0 indicate contraction.

Key findings from the August survey include:

•    Incoming new work increases at fastest rate since April;
•    Firms further boost production levels; and
•    Rate of input price inflation eases to eight-month low.

The latest expansion in the Canadian manufacturing sector partly reflected firms receiving a larger volume of new orders in August, the index indicated. Incoming new orders from abroad also increased, with a number of monitored companies highlighting the US as a key source of new export order growth.

Due to the new order requirements, firms increased production in August, and survey respondents also fulfilled some new orders by depleting their stocks of finished goods for the second consecutive month.

The amount of inputs bought by firms increased during the latest survey period, and stocks of purchases rose marginally. Meanwhile, the average time for suppliers to deliver inputs to Canadian manufacturers lengthened in August, according to the index. The latest deterioration in vendor performance was the strongest since May.

Employment in the Canadian manufacturing sector increased during August. Notably, the rate of growth was the fastest in three months. Almost 22 percent of surveyed firms hired additional staff, while nine percent reported job losses.

Canadian manufacturing companies recorded higher input costs in August. Respondents particularly mentioned price increases for raw materials like metals and petroleum-based items. Still, the rate of input cost inflation eased since the previous survey period, and was the weakest in 2011 so far.