September sees weak expansion: PMI

Index shows slowest growth six months

October 2, 2012
by Purchasing b2b staff

Growth of Canada’s manufacturing sector lost momentum in September with the weakest pace of expansion recorded since March, according to the RBC Canadian Manufacturing Purchasing Managers’ Index. A monthly survey, conducted with Markit and PMAC, the index offers a comprehensive and early indicator of trends in the sector.

The headline RBC PMI—a snapshot of the health of the manufacturing sector—registered 52.4 in September, which is evidence of a modest expansion. But having fallen from 53 in August it was the slowest for six months. The weaker performance was further highlighted by the quarterly average PMI reading falling from 54.3 in the three months to June, to 52.8 in the three months to September.

Output and new orders increased during September, partly reflecting greater client demand. Growth rates eased since August, with the latest expansion in production the second-weakest in the two-year survey history. The job creation rate also eased, slowing to a five-month low. Inflationary pressures meanwhile picked up in September, with input prices rising strongly since August.

The survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times. Key findings include:

• output and new orders growth slows to eight- and six-month lows respectively;
• moderate rise in employment, but job creation rate weakest since April; and
• input prices increase strongly.

Incoming new work rose further in September with several companies attributing this to greater client demand. The volume of new export orders also increased marginally. Total new orders rose moderately since August, but the growth rate was the slowest in six months.

Manufacturing production rose due to larger new order requirements, however the increase in output levels was the second-weakest in two years. Backlogs of work and stocks of finished goods were broadly unchanged. The input quantity bought by Canadian manufacturing firms also rose. Panellists commented on raising their purchases to meet the increase in output and rebuild input inventories. Delivery times also lengthened modestly.

Manufacturing sector employment increased with about 17 percent of firms hiring additional staff from August. Anecdotal evidence linked the increase to greater production requirements. Exactly 14 percent reduced their workforces over the month, while the job creation rate slowed to its weakest in five months.

Input costs rose further in September, with fuel and raw materials like metals and plastics mentioned as having increased. The inflation rate was strong and the fastest in four months. Firms passed on greater cost burdens to clients by raising output charges. Average selling prices rose modestly, the strongest increase since April.