RBC's purchasing managers index climbs in April

Output and new order growth accelerates to fastest rates in 2012 to date

May 23, 2012
by Purchasingb2b Staff

Canadian manufacturing business conditions in April improved to the greatest extent in 2012 so far, according to the RBC Canadian Manufacturing Purchasing Managers Index (RBC PMI), a monthly survey done with PMAC offering an early indicator of trends in the Canadian manufacturing sector. The headline RBC PMI showed a solid improvement in Canadian manufacturing business conditions in April. At 53.3, up from 52.4 in March, the PMI was the highest in four months but below the average for the series.

“Encouraging signs came from the latest RBC PMI report, with both new orders and output increasing solidly in April. Manufacturers reported a pick up in new export orders, with greater demand from the U.S. particularly highlighted,” said Cheryl Paradowski, president and CEO, PMAC. “The increase in output contributed to higher input purchases and the first accumulation of input inventories since August 2011, which added to suppliers’ delivery delays. Although the RBC PMI signalled the strongest improvement in business conditions so far in 2012, it still remained below the series average in April.”

The index found output and new orders increased in April, with firms citing greater client demand. New export orders grew solidly and at the fastest pace for a year. Canadian manufacturers hired additional staff in April, but job creation was the slowest in three months. The rate of input price inflation was the strongest since last August. The survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times. Key findings from the April survey include:

  • RBC PMI at four-month high, but still below the series trend;
  • Greater client demand supports further increases in both total and export orders; and
  • Employment growth the weakest in three months.

Firms largely linked improved business conditions to greater client demand and new contract wins in April. About 35 percent received a larger volume of new orders compared with March, with the rate of growth at a four-month high. New work intakes from abroad also increased in April, with new export orders from the US particularly mentioned.

Canadian manufacturers raised production and depleted stocks of finished goods in April. Output has increased in each month since data collection began in October 2010, with the latest rise the strongest since last December, while inventories of post-production goods declined for the tenth month running. Backlogs of work were broadly unchanged since March.

The amount of inputs bought by Canadian manufacturing companies increased solidly during the latest survey period. Input inventories also rose, increasing for the first time since August 2011. Suppliers’ delivery times meanwhile lengthened further in April, with the latest deterioration in vendor performance the greatest in seven months.

Employment in Canada’s manufacturing sector rose for the third consecutive month in April. Firms that hired additional staff generally commented on larger production requirements. But the rate of job creation eased since March, was slower than the series average and the weakest in the current sequence of growth.

Input costs rose further in April, with fuel and raw materials mentioned as having increased in price. The rate of input price inflation was marked and the strongest in eight months. Firms passed parts of their greater cost burdens on to clients by raising their selling prices. Output charges rose solidly over the month, in contrast to a slight reduction reported in March.

Regional highlights include:

  • April data signalled manufacturing business conditions improved in all four Canadian regions. The strongest monthly improvement was posted in Quebec;
  • The fastest rate of new order growth was reported by manufacturers based in Quebec, while the slowest expansion was in Alberta & British Columbia;
  • Job creation was reported in three regions in April, with the only exception Alberta & British Columbia; and
  • Ontario posted the strongest increase in both input prices and output charges in April.