Headline RBC PMI showed the weakest rate of manufacturing growth since October 2010
TORONTO–The RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI) signalled that Canada’s manufacturing sector grew only marginally in November. A monthly survey, conducted in association with Markit, a leading global financial information services company, and the Purchasing Management Association of Canada (PMAC), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian manufacturing sector.
The headline RBC PMI – a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector – fell from 51.4 to 50.4 in November, and indicated the weakest rate of manufacturing growth since data were first available in October 2010.
The fall partly reflected incoming new work remaining broadly unchanged from October and the first contraction in output in 26 months of data collection. Manufacturers generally cited weak market conditions. Nevertheless, firms continued to hire additional staff in November, although the rate of job creation was only modest and the slowest since April.
“November was one of the most difficult months for Canadian manufacturers in the past two years, with RBC PMI data showing a month-over-month fall in production and new order growth grinding to a halt. This reflected weaker domestic and export market conditions,” said Cheryl Paradowski, president and chief executive officer, PMAC. “Nonetheless, firms continued to hire additional staff, although the rate of job creation slowed for the sixth month running and was only modest.”
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:
The volume of new orders received by Canadian manufacturers was broadly unchanged from October, with panellists largely linking this to weak market conditions. New export orders meanwhile fell modestly and for the first time since February.
The flat new orders trend was one of the factors behind a fall in production during November. This was the first reduction in output in 26 months of data collection, but the rate of decline was only marginal. Stocks of finished goods, meanwhile, were depleted, in contrast to accumulation one month previously, and backlogs of work fell sharply and for the second month running.
Reflective of lower output requirements, the quantity of inputs bought by manufacturing firms fell during the latest survey period. Stocks of purchases were also reduced, with a number of panellists attributing this to leaner inventory requirements.
Suppliers’ delivery times nonetheless lengthened further in November, with approximately 11 percent of firms reporting increased lead times since October. Respondents suggested that suppliers were working with less stock and that some vendors were also affected by Hurricane Sandy.
Manufacturing employment in Canada increased for the tenth consecutive month in November. Where higher staffing levels were reported, firms commented on replacing employees who had recently left. However, the rate of job creation was only modest and the slowest since April.
Firms reported a further rise in cost burdens during the latest survey period, with this largely reflective of higher raw material prices. That said, the rate of input price inflation was the weakest in three months and slower than the series average. Manufacturers’ selling prices also increased in November as panellists passed on greater costs to clients. Despite having quickened since October, the latest increase in output prices remained modest overall.
Regional highlights include: