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RBC PMI: Manufacturing sector survey dips to record low in October

RBC PMI: Manufacturing sector dips to record low in October

RBC Canadian Manufacturing PMI
RBC PMI: Manufacturing sector dips to record low in October

TORONTO, November 2, 2015 - The latest RBC Canadian Manufacturing PMI survey pointed to another downturn in overall business conditions, with output, new orders and employment all declining since the previous month. Moreover, new export sales dropped for the first time since April, with survey respondents noting that weaker global economic conditions had weighed on new business volumes.

Meanwhile, input costs rose at a sharp and accelerated pace in October, which placed pressure on operating margins and contributed to a further slight increase in factory gate charges.

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

Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI posted 48.0 in October, down from 48.6 in September and below the neutral 50.0 threshold for the third month in a row. Moreover, the latest reading signalled the sharpest rate of deterioration since the survey began in October 2010.

“Heightened global economic uncertainty and ongoing energy price weakness continues to weigh on the Canadian manufacturing sector, as indicated by October’s record-low reading of 48.0,” said Craig Wright, senior vice-president and chief economist, RBC. “As we move toward the end of the year, we expect that a strengthening U.S. economy and weaker Canadian dollar will fuel demand for Canada’s exports, resulting in a shift to positive growth territory.”

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

Key findings from the October survey included:

  • Sharpest deterioration in business conditions since the survey began in October 2010
  • Production levels fell at a steeper rate in October, despite softer decline in new orders
  • Manufacturing employment numbers decreased for the fourth consecutive month

A faster reduction in manufacturing output levels was the main factor contributing to a drop in the headline index during October, as new business volumes decreased at a slightly slower pace than one month previously. Manufacturers linked the survey-record fall in production levels to a combination of weaker underlying demand and efforts to reduce their stocks of finished goods. Reflecting this, latest data indicated the sharpest decline in post-production inventories since the survey began five years ago.

At the same time, manufacturers pared back their input buying for the fourth month running in October, which contributed to the fastest fall in stocks of purchases in the survey history.

Overall volumes of new work decreased slightly in October, but the rate of decline eased since September and was broadly in line with the average so far in 2015. That said, for the first time in six months, manufacturers reported a decrease in export sales. Meanwhile, backlogs of work were lowered again during October, reflecting a general lack of pressure on operating capacity.

Canadian manufacturers indicated a modest reduction in their payroll numbers during the latest survey period, thereby continuing the trend seen throughout much of the year to date. Anecdotal evidence suggested that staffing levels were mainly reduced through the non-replacement of voluntary leavers. Some firms also commented on additional measures to avoid forced job cuts at their plants, including work-share arrangements and greater efforts to boost productivity.

Suppliers’ delivery times lengthened across the manufacturing sector in October, as has now been the case for almost two-and-a-half years. Survey respondents suggested that international shipping delays, alongside capacity cuts among local suppliers, had led to longer lead times for inputs. The latest survey also pointed to upward pressure on input prices, with overall cost burdens rising at the second-fastest pace since July 2014. Manufacturers overwhelmingly linked higher input costs to exchange rate depreciation against the U.S. dollar.

Regional highlights include:

  • Alberta and British Columbia remained by far the worst performing region in October
  • Quebec experienced a renewed deterioration in manufacturing sector performance
  • Ontario and the Rest of Canada continued to record an overall upturn in manufacturing conditions
  • Manufacturers in all regions reported a sharp and accelerated rise in their average input costs

“The lack of spending by Canada’s oil and gas sector, and weak economic conditions abroad, made October a very tough month for Canada’s manufacturing sector. October saw the sharpest fall in manufacturing production in at least five years, and the overall performance of the sector has dropped to yet another record low” said Cheryl Paradowski, president and chief executive officer, SCMA. “This latest fall in production was made worse by manufacturers cutting into their inventories, as the fall in new orders from Canadian manufacturers has levelled off since September. Despite these challenges, we see evidence that employers have tried to limit job cuts as much as possible through initiatives like work-share arrangements, and want to retain their staff in anticipation of future growth.

“The provincial picture remains very mixed. In Alberta and BC, manufacturers saw demand fall sharply and have aggressively cut prices to maintain market share. Ontario’s manufacturing sector continues to perform pretty well, with the weaker loonie and rising U.S. demand driving exports and helping to sustain production growth.”

The report is available at

For further information, please contact:

Royal Bank of Canada
Romina Mari, Manager, Corporate Communications, Canada
RBC Capital Markets
Telephone: +001-416-974-3558

Supply Chain Management Association
Cheryl Paradowski, President and CEO
Telephone +001-416-542-9120

Amanda Cormier, Director, Public Affairs & Communications,
Public Affairs & Communications
Telephone +001-416-542-3860

Tim Moore, Senior Economist
Telephone +44-1491-461-067

Joanna Vickers, Corporate Communications
Telephone +44-207-260-2234

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 by company workforce size 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

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, 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 38 other countries. For more information, please visit

RBC supports a broad range of community initiatives through donations, sponsorships and employee volunteer activities. In 2014, we contributed more than $111 million to causes worldwide, including donations and community investments of more than $76 million and $35 million in sponsorships.

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

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 approximately 4,000 people in 11 countries. Markit shares are listed on NASDAQ under the symbol MRKT. For more information, please see

About PMI
Purchasing Managers’ Index (PMI) surveys are now available for over 30 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

The intellectual property rights to the RBC Canadian Manufacturing PMI provided herein are owned by or licensed to Markit. 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.