The headline purchasing managers' index dips to nine-month low
September data pointed to slower overall growth across the Canadian manufacturing sector, largely reflecting weaker rises in production volumes and incoming new work. A robust rate of job creation was maintained in September as manufacturers sought to boost operating capacity and reduce their backlogs of work. Meanwhile, longer delivery times from suppliers continued to influence purchasing strategies, as highlighted by another marked rise in stocks of inputs at manufacturing firms.
The seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) dropped from 56.8 in August to 54.8 in September, to signal the slowest improvement in overall business conditions since December 2017.
Production growth was the weakest for five months in September, which survey respondents attributed to a combination of capacity constraints and subdued demand conditions. New work expanded at the least marked pace for 11 months. Manufacturers noted that global trade frictions continued to hold back export sales growth. Backlogs of work declined for the first time since August 2017. This contrasted with the survey-record rise in unfinished business seen in June. Manufacturers noted that additional staff recruitment in recent months had helped to alleviate capacity pressures at their plants.
Staffing levels increased at a robust pace in September, which marked two years of sustained job creation across the manufacturing sector. Survey respondents linked higher payroll numbers to greater business investment and forthcoming new product launches.
September data signalled another marked deterioration in vendor performance, which was attributed to stretched transport capacity and shortages of stock at suppliers. That said, the latest lengthening in input delivery times was the least severe since January.
Manufacturers responded to longer lead times from suppliers by increasing their stocks of inputs in September. The rate of inventory building eased only slightly from August’s surveyrecord high.
A strong rate of input cost inflation continued in September, with manufacturers reporting higher prices for steel, aluminum and electronic components. That said, the overall rise in cost burdens was the least marked since February. At the same time, surcharges for metals contributed to another robust increase in average prices charged by manufacturers in September.
Meanwhile, manufacturers indicated that their near-term growth expectations slipped to the lowest in 2018 so far. Survey respondents frequently cited concerns about global trade frictions, alongside a lack of suitably skilled candidates to fill vacancies at their plants.
Regional data indicated that only Alberta & British Columbia bucked the overall slowdown recorded in September, with business conditions improving at a robust pace. Ontario and Quebec both recorded softer overall rates of expansion, largely reflecting a weaker contribution from new order growth.