Output growth hits eight-month high: PMI

Index found Canadian manufacturing business conditions improved in December

January 17, 2012
by Purchasing b2b staff

Production and new orders both rose strongly in December, according to the RBC Canadian Manufacturing Purchasing Managers Index, a monthly survey conducted with financial services information company Markit and PMAC. The headline RBC PMI—a composite indicator providing a snapshot of the health of the manufacturing sector—posted 54 in December, up from 53.3 in November, and signalled an improvement in Canadian manufacturing business conditions. 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 December with firms commenting on greater client demand. New orders and output increased at rates faster than registered in November. New export orders also rose in December, ending a two-month period of decline. Meanwhile, the rate of input price inflation eased further during the latest survey period and was at the slowest pace in the 15-month series history. In addition to the headline RBC PMI, the survey tracks changes in output, new orders, employment, inventories, prices and supplier delivery times. Key findings from the December survey include:

  • Strong increases in new orders and production;
  • Job creation remains solid; and
  • Rate of input price inflation slowest in 15-month series history.

Firms partly linked the improvement in business conditions to greater client demand. Approximately 30 percent reported an increase in new orders compared with 21 percent that registered a decrease. New order growth was strong and the fastest in three months. Incoming new work from abroad also rose in December, in contrast to declines registered in each of the past two months.

Canadian manufacturing firms raised production in December. Output increased strongly, with the rate of growth the fastest since April. Stocks of finished goods were also depleted, while backlogs were reduced for the third month running. The amount of inputs bought by monitored companies increased in December. Meanwhile, input inventories were depleted for the fourth consecutive month. Anecdotal evidence attributed higher purchasing activity to larger new order requirements.

Lead times on inputs increased, and panelists suggested vendors struggled with greater input demand. Although the latest lengthening of delivery times was solid, it was the weakest in the 15-month survey history. Employment in Canada’s manufacturing sector also rose in December. Approximately 19 percent of surveyed firms hired additional staff (while 13 percent reduced their workforces) and linked job creation to increases in new order volumes.

Canadian manufacturers reported higher input costs in December, with raw materials such as steel and sugar particularly mentioned as increasing in price. That said, the rate of input price inflation eased further from April’s peak and was the slowest in the series history.

Regional highlights include:

  • Business conditions improved in three of four regional manufacturing sectors. The exception was Quebec, where operating conditions were unchanged from November;
  • Ontario posted the fastest rate of new order growth, closely followed by Alberta and British Columbia;
  • Quebec was the only region to register job losses in December; and
  • The fastest rate of input price inflation was registered in Alberta and British Columbia.