New order growth picks up despite fall in export sales
Canadian manufacturers experienced another solid improvement in overall business conditions during November, but momentum remained softer than on average in the first half of this year. Reflecting this, manufacturing production growth eased to an 11-month low, while new order volumes expanded at one of the slowest rates seen in 2017 so far. A robust rate of job creation was maintained in November, reflecting continued efforts to boost operating capacity.
The seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 54.4 in November, little-changed from October’s nine-month low of 54.3. A stronger upturn in new order volumes and job creation helped to offset a weaker contribution from production growth. A marginal rebound in stocks of purchases also had a positive impact on the headline PMI in November.
Manufacturing output growth eased to its slowest since December 2016, which some firms attributed to subdued client demand in recent months. Higher levels of production have been recorded in each of the past 13 months, but the speed of recovery has slowed from the peak seen in March.
New order growth accelerated slightly from October’s 10-month low, but remained softer than at any time seen in the first half of 2017. Survey respondents noted that resilient domestic demand and a rebound in energy sector spending had supported the increase in new work. However, there were reports that reduced export sales had acted as a brake on overall new business growth in November. Although only marginal, the latest fall in new work from abroad was the fastest since September 2016, which was mainly attributed to weaker spending among US clients.
Manufacturers experienced another increase in backlogs of work at their plants in November, driven by pressures on capacity and recent supply chain disruptions. Efforts to boost production schedules led to another robust rise in employment numbers, with the rate of job creation edging up to a three-month high.
Stocks of finished goods were reduced at the sharpest pace since the survey began in October 2010. Inventory depletion was mainly linked to constrained production capacity. Meanwhile, manufacturers indicated a slight rebound in pre-production inventories, despite a further sharp lengthening of delivery times for inputs.
Input cost inflation was the strongest since April 2014, which was linked to rising prices for a range of materials (particularly metals, plastics and packaging). Greater operating expenses led to the fastest rise in factory gate charges for over three-and-a-half years in November.