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RBC Canadian manufacturing PMI hits 11-month high in October

 

RBC Canadian Manufacturing PMI<sup>™</sup>: RBC PMI continued to improve in September

RBC Canadian Manufacturing PMI: Canadian manufacturing hits 11-month high in October

 

TORONTO, November 3, 2014 -  Business conditions across the Canadian manufacturing sector showed a robust rebound in October, led by the fastest upturn in new order volumes since November 2013. As a result, production levels increased at an accelerated pace and manufacturing firms continued to boost their payroll numbers, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI).

A monthly survey, conducted in association with Markit, a leading global financial information services company, and the Supply Chain Management Association (SCMA), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian manufacturing sector.

Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI registered 55.3 in October, up from 53.5 in September and above the neutral 50.0 value for the nineteenth consecutive month. The latest reading pointed to the strongest improvement in overall business conditions since November 2013.

“We saw a strong uptick in Canada’s manufacturing business conditions in October driven by new order growth,” said Craig Wright, senior vice-president and chief economist, RBC. “Despite the challenges we are seeing in the European and emerging markets, the continued recovery of the U.S. economy should continue to support Canadian exports going forward.”

The headline RBC PMI reflects changes in output, new orders, employment, inventories and supplier delivery times.

Key findings from the October survey include:

  • New order growth rebounded to its fastest since November 2013...
  • ...despite only a marginal rise in new export business
  • Input cost inflation eased to the lowest in 2014 to date

New business levels increased across the manufacturing sector in October, with the sharpest rate of expansion in nearly a year. Anecdotal evidence linked improved sales volumes to new product launches, successful marketing initiatives and competitive pricing strategies. In spite of these factors, volumes of new export business increased only marginally in October, and the rate of expansion was subdued in comparison to the average since the survey began in late-2010.

Sustained output and new business growth contributed to a solid increase in manufacturing employment levels. The rate of job creation eased slightly during October, but remained close to August’s 11-month high. Meanwhile, backlogs of work were accumulated for the ninth consecutive month and at the sharpest pace for three months.

The latest survey highlighted ongoing supply-chain pressures across the manufacturing sector, in part reflecting a further robust increase in purchasing activity. Delivery times from vendors lengthened for the sixteenth successive month in October, with the latest deterioration of vendor performance the sharpest since April.

Supply chain bottlenecks encouraged some firms to build up their stocks of inputs in October resulting in the most marked increase in stocks of purchases since May 2012. Meanwhile, inventories of finished goods were depleted for the fourth consecutive month.

Despite strong domestic demand for inputs and reports of upward pressure on costs from exchange rate depreciation, October data indicated a further moderation in overall purchase price inflation. Moreover, the latest rise in average cost burdens was the slowest recorded in 2014 to date. This in turn contributed to softer factory gate price inflation during October. Slower rises in manufacturing output charges have now been recorded in each of the past five months, driven by strong competition for new work and weaker underlying cost pressures.

Regional highlights include:

  • Ontario recorded the sharpest expansion of manufacturing production
  • All regions posted increased employment levels, led by Alberta & British Columbia
  • Alberta & British Columbia and Ontario registered stronger order inflows from abroad
  • …contrasting with declines in Quebec and the rest of Canada

“Canada’s manufacturing sector looks to have regained momentum at the start of the fourth quarter” said Cheryl Paradowski, president and chief executive officer, SCMA. “Business conditions improved at the fastest pace for almost a year, highlighting that the sector is showing resilience in the face of subdued demand across the euro area and emerging markets. Solid job creation was maintained during October, but supply-chain pressures remain a concern as the latest survey indicated a steep and accelerated deterioration in suppliers’ delivery times.”

The report is available at www.rbc.com/newsroom/pmi.

For further information, please contact:


Royal Bank of Canada
Elyse Lalonde,
Communications Manager, Canada,
RBC Capital Markets,
Telephone +001-416-842-5635
Email elyse.lalonde@rbc.com

Supply Chain Management Association
Cheryl Paradowski, President and CEO
Telephone +001-416-542-9120 Email cparadowski@pmac.ca

Markit
Tim Moore, Senior Economist
Telephone +44-1491-461-067
Email tim.moore@markit.com

Amanda Cormier, Acting Director,
Public Affairs & Communications
Telephone +001-416-542-3860
Email acormier@scmanational.ca

Joanna Vickers, Corporate Communications
Telephone +44-207-260-2234
Email joanna.vickers@markit.com

Notes to Editors:

The RBC Canadian Manufacturing PMI Report is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 400 industrial companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on industry contribution to Canadian GDP.

Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the ‘Report’ shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

The RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers’ Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times Index inverted so that it moves in a comparable direction.

The Purchasing Managers’ Index (PMI) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.

Markit does not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series. Historical data relating to the underlying (unadjusted) numbers, first published seasonally adjusted series and subsequently revised data are available to subscribers from Markit. Please contact economics@markit.com.

ABOUT RBC
Royal Bank of Canada is Canada’s largest bank, and one of the largest banks in the world, based on market capitalization. We are one of North America’s leading diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, investor services and capital markets products and services on a global basis. We employ approximately 79,000 full- and part-time employees who serve more than 16 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 40 other countries. For more information, please visit rbc.com.

RBC supports a broad range of community initiatives through donations, sponsorships and employee volunteer activities. In 2013, we contributed more than $104 million to causes worldwide, including donations and community investments of more than $69 million and $35 million in sponsorships. Learn more at www.rbc.com/community-sustainability.

About Supply Chain Management Association
As the leading and largest association in Canada for supply chain management professionals, the Supply Chain Management Association (SCMA) is the national voice for advancing and promoting the profession. SCMA sets the standard of excellence for professional skills, knowledge and integrity and was the first supply chain association in the world to require that all members adhere to a Code of Ethics.

With nearly 8000 members working across the private and public sectors, SCMA is the principal source of supply chain training, education and professional development in the country. Through its 10 Provincial and Territorial Institutes, SCMA grants the Supply Chain Management Professional (SCMP) designation, the highest achievement in the field and the mark of strategic supply chain leadership.

SCMA was formed in 2013 through the amalgamation of the Purchasing Management Association of Canada and Supply Chain and Logistics Association of Canada. With a combined history of more than 140 years, today the association embraces all aspects of strategic supply chain management, including: purchasing/procurement, strategic sourcing, contract management, materials/inventory management, and logistics and transportation. For more information, please visit scmanational.ca.

About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ over 3,000 people in 10 countries. Markit shares are listed on NASDAQ under the symbol “MRKT”. For more information, please see www.markit.com.

About PMI Purchasing Managers’ Index (PMI) surveys are now available for 32 countries and also for key regions including the Eurozone. They are the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to markit.com/economics.

The intellectual property rights to the RBC Canadian Manufacturing PMI provided herein are owned by or licensed to Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index and PMI are either registered trade marks of Markit Economics Limited or are licensed to Markit Economics Limited. RBC uses the above marks under licence. Markit is a registered trade mark of Markit Group Limited.

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