Purchasing index hits eight-month high

Manufacturing employment also increases for the fourth consecutive month

June 1, 2012
by Purchasing b2b staff

TORONTO: Canada’s manufacturing business conditions improved to the greatest extent in eight months during May, according to the RBC Canadian Manufacturing Purchasing Managers Index, done with financial information services company Markit and PMAC. The headline RBC PMI—showing a snapshot of the health of the manufacturing sector—hit 54.7, up from 53.3 in April. The RBC PMI recorded the strongest monthly improvement since September 2011.

The RBC PMI found output and new orders increased in May, with firms citing greater client demand. Expansion rates were strong and the fastest this year to date. Manufacturing employment increased for the fourth consecutive month, while the rates of input and output price inflation slowed from April.
The survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times.

Canadian manufacturers generally attributed the improvement in business conditions to greater client demand. Incoming new work rose further in May, with about 37 percent of firms reporting an increase compared with April. New export orders also rose, with higher demand from the US and Asia. Total new work intakes increased strongly in May, with the growth rate the strongest in 2012 to date.

Firms also increased production in May. Output rose solidly over the month, with the expansion stronger than the series average. Stocks of finished goods were depleted slightly to fulfill some new order requirements and work backlogs increased marginally.

Inputs bought by monitored companies increased. Panellists attributed the rise in purchases to greater production. Firms held some of their purchases as stock, with input inventories rising. Meanwhile, suppliers’ delivery times lengthened but to a lesser extent than in April.

Manufacturing employment in Canada rose for the fourth consecutive month in May, with almost 27 percent of firms hiring additional staff since April. Overall, the job creation rate was strong and the fastest since last September.

Companies reported higher raw material prices and unfavourable exchange rates contributed to larger cost. The rate of input price inflation remained marked, despite having eased since April. Panellists passed parts of the increase to clients by raising prices. However, output charges rose only modestly and at a weaker rate weaker than the series average. Regional highlights include:

•    Manufacturing business conditions improved in all four Canadian regions. The strongest monthly improvement was in Quebec;
•    Quebec posted the fastest new order growth rate, while the slowest expansion in new work intakes was in Alberta & British Columbia;
•    All four regions registered jb creation, with the strongest rise in Quebec; and
•    Ontario had the fastest rate of input price inflation.