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RBC Canadian Manufacturing PMI™ signals the fastest rise in export sales since September 2013

RBC PMI signals the fastest rise in export sales since September 2013

RBC PMI signals the fastest rise in export sales since September 2013

 

TORONTO, December 1, 2014 -  Canadian manufacturers pointed to a further robust improvement in business conditions across the sector in November, supported by strong increases in output and new order volumes, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI). Moreover, the latest survey highlighted a sharp rebound in export sales, with incoming new business from abroad rising at the fastest pace since September 2013.

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.

At 55.3 in November, the seasonally adjusted RBC Canadian Manufacturing PMI held steady from October’s 11-month peak and remained above the neutral 50.0 threshold for the twentieth consecutive month. As a result, the headline index signalled a robust overall improvement in manufacturing conditions in November. Moreover, the average PMI reading for Q4 so far of 55.3 is the highest for any quarter since Q1 2011.

“The latest RBC PMI data shows continued strength in the manufacturing sector led by increases in output and employment. New export orders recorded a strong jump in the month, pointing to continued support from a stronger U.S. economy and a more competitive Canadian dollar,” said Craig Wright, senior vice-president and chief economist, RBC. “This trend is expected to continue with additional support for the manufacturing sector coming from lower energy and transportation costs.”

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

Key findings from the November survey include:

  • Output growth hits three-month high
  • New export orders rise for the second consecutive month
  • Slowest increase in cost burdens since November 2013

Canadian manufacturers pointed to a further robust improvement in business conditions across the sector in November, supported by strong increases in output and new order volumes. Moreover, the latest survey highlighted a sharp rebound in export sales, with incoming new business from abroad rising at the fastest pace since September 2013. Meanwhile, input price inflation continued to soften in November, as manufacturers signalled that lower fuel and transportation costs helped offset rising prices for imported raw materials.

November data indicated a strong and accelerated expansion of Canadian manufacturing production. The latest upturn in output volumes was the fastest for three months and much stronger than the average seen since the survey began in late 2010. New order volumes also increased at a robust pace in November, with the rate of growth easing only slightly from October’s 11-month high. A number of survey respondents commented on improving demand from export clients, especially those based in the U.S. The latest upturn in overall new business from abroad was the steepest for just over a year.

Higher levels of new work resulted in some pressures on operating capacity across the Canadian manufacturing sector in November. Volumes of unfinished business have now increased for ten consecutive months, but the rate of backlog accumulation eased slightly since October. Survey respondents also noted that greater workloads and optimism towards the business outlook supported job creation at their plants in November. Latest data signalled the fastest rate of manufacturing employment growth since August.

Stocks of finished goods decreased during November, with the rate of decline the most marked for almost a year-and-a-half. Some manufacturers attributed the fall in post-production inventories to stronger than expected sales.

Improving demand conditions encouraged manufacturers to boost their pre-production stocks in November, which underpinned a further robust increase in input buying. Meanwhile, input cost inflation eased to a 12-month low in the manufacturing sector, leading to the slowest rise in factory gate charges since August 2013.

Regional highlights include:

  • Ontario remained the best performer in terms of output growth, posting the steepest expansion since March 2011
  • Manufacturing payroll numbers rose in all regions, led by Ontario and Alberta & British Columbia
  • Alberta & British Columbia saw the fastest upturn in new export orders
  • All regions registered an increase in new work during November, except Quebec

“A strong upturn in export sales underpinned the latest improvement in Canadian manufacturing business conditions” said Cheryl Paradowski, president and chief executive officer, SCMA. “Manufacturers are benefiting from the weaker exchange rate, improving U.S. economic conditions and increased success in exporting to new markets. Supply chain strains remained prevalent in November and manufacturers noted that imported raw material costs were again on the rise. However, lower fuel and transportation costs helped alleviate inflationary pressures across the manufacturing sector, with the overall pace of input price inflation the lowest for a year.”

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

For further information, please contact:
Royal Bank of Canada
Christine Stewart, Senior Manager, Corporate Communications, Canada,
RBC Capital Markets,
Telephone +001-416-842-5635
Email christine.stewart@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.

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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.