November new order and output growth slows: PMI

Index shows weakest improvement in Canadian manufacturing business conditions in four months

December 12, 2011
by Purchasing b2b staff

TORONTO: Output and new orders rose at slower but solid rates in November, according to the RBC Canadian Manufacturing Purchasing Managers Index (RBC PMI), a monthly survey conducted with Markit and PMAC, which offers trends in the Canadian manufacturing sector.

The headline RBC PMI—a composite indicator of the health of the manufacturing sector—registered 53.3 in November, down from 53.7 in October and indicating the weakest improvement in Canadian manufacturing business conditions in four months. Index readings above 50 signal expansion from the previous month; readings below 50 indicate contraction.

The index found Canadian manufacturing business conditions improved further in November. New orders and output both increased solidly, with firms linking growth to greater client demand. Still, the rates of increase eased since October to five- and four-month lows respectively. New export orders also fell for the second month running, while the rate of input price inflation slowed from April’s peak to the weakest in the 14-month survey history. In addition to the headline RBC PMI, the survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times. Key findings from the November survey include:

  • New work intakes increase at weakest pace since June;
  • Job creation remains solid; and
  • Slowest rate of input price inflation in 14-month survey history.

Firms partly attributed the latest improvement in operating conditions to greater client demand. Subsequently, the volume of new orders received by Canadian manufacturers rose solidly in November. That said, new order growth eased since October and was the weakest in five months. Meanwhile, new export orders fell for the second month running, albeit the latest decline was only marginal.

Reflective of larger new orders, monitored companies raised production further in November. Output growth was the slowest since July. Backlogs of work fell for the second consecutive month, while stocks of finished goods decreased modestly. Employment in Canada’s manufacturing sector increased further during November. About one-fifth of surveyed firms hired additional staff, compared with 12 percent that reduced staff, and linked job creation to further output growth.

Canadian manufacturers recorded higher input costs during the latest survey period. Fuel and steel were particularly mentioned as having increased in price. Although the rate of input price inflation was solid overall, it slowed further from April’s peak to the weakest in the 14-month series history. Respondents tried passing on greater cost burdens to clients by raising their output charges in November. However, average selling prices rose only fractionally, with a number of monitored companies commenting on stronger competitive pressures. Regional highlights include:

  • Manufacturing business conditions improved in all four broad Canadian regions in November. The latest expansion was led by Alberta and BC;
  • Alberta and BC registered the fastest increase in new work intakes;
  • Quebec was the only region to register job losses;
  • Alberta and BC manufacturers reported the strongest rate of input price inflation.