Purchasing Managers' Index
MARKET SENSITIVE INFORMATION
RBC Canadian Manufacturing Purchasing Managers'
IndexTM finds output growth strengthens to
eight-month high in December
January 3, 2012 Production and new orders
both rose strongly in December, according to the RBC Canadian
Manufacturing Purchasing Managers IndexTM
(RBC PMITM), a monthly survey, conducted in
association with Markit, a leading global financial information
services company, and the Purchasing Management Association
of Canada (PMAC), which offers a comprehensive and early indicator
of trends in the Canadian manufacturing sector.
The headline RBC PMI - a composite indicator designed to provide a single-figure
snapshot of the health of the manufacturing sector - posted
54.0 in December, up from 53.3 in November, and signalled
a solid improvement in Canadian manufacturing business conditions.
Index readings above 50.0 signal expansion from the previous
month; readings below 50.0 indicate contraction.
The RBC PMI found that Canadian manufacturing business conditions improved
further in December. Firms generally commented on greater
client demand. Concurrently, both new orders and output increased
strongly and at rates faster than registered in November.
New export orders also rose in December, ending a two-month
period of decline. Meanwhile, the rate of input price inflation
eased further during the latest survey period and was at the
slowest pace in the 15-month series history.
The Canadian manufacturing sector has demonstrated
its resilience as the global economy faces some strong headwinds,"
said Craig Wright, senior vice-president and chief
economist, RBC. "After some temporary setbacks in 2011,
Canada's economy is set to grow by 2.5 per cent in 2012, provided
that European policymakers contain the sovereign debt crisis
in that region.
In addition to the headline
RBC PMI, the survey also tracks changes in output, new
orders, employment, inventories, prices and supplier delivery
Key findings from the December survey include:
- Strong increases in both new orders and production
- Job creation remains solid
- Rate of input price inflation slowest in 15-month series
Firms partly linked the improvement in business conditions
to greater client demand. Approximately 30 per cent of respondents
reported an increase in new orders compared with 21
per cent that registered a decrease. Overall, new order growth
was strong and the fastest in three months. Incoming new
work from abroad also rose in December, in contrast to
declines registered in each of the past two months.
Reflective of larger new order volumes, Canadian manufacturing
firms raised production in December. Output increased
strongly, with the rate of growth the fastest since April.
Stocks of finished goods were also depleted, while
backlogs were reduced for the third month running.
The amount of inputs bought by monitored companies
increased in December, as has been the case since data collection
began in October 2010. Meanwhile, input inventories
were depleted for the fourth consecutive month. Anecdotal
evidence attributed higher purchasing activity to larger new
Lead times on inputs increased further during the latest
survey period. Panellists suggested that vendors struggled
with greater input demand. Although the latest lengthening
of delivery times was solid, it was nonetheless the
weakest in the 15-month survey history
Employment in Canada's manufacturing sector rose solidly
in December. Approximately 19 per cent of surveyed firms hired
additional staff (while 13 per cent reduced their workforces),
and largely linked job creation to the recent increases in
new order volumes.
Canadian manufacturers reported higher input costs
in December, with raw materials such as steel and sugar particularly
mentioned as having increased in price. That said, the rate
of input price inflation eased further from April's peak and
was the slowest in the series history. Firms partly passed
on larger cost burdens to clients by raising their selling
prices. However, the latest increase in output charges
was only marginal and below the series average.
Regional highlights include:
- Regional PMI data indicated that business conditions improved
in three out of four regional manufacturing sectors in December.
The only exception was Quebec, where operating conditions
were unchanged from November.
- Ontario posted the fastest rate of new order growth,
closely followed by Alberta & British Columbia.
- Quebec was the only region to register job losses in December.
- The fastest rate of input price inflation was registered
in Alberta & British Columbia.
Canadian manufacturing sector business conditions improved further
in December, with both output and new orders increasing strongly.
This in part reflected greater client demand from both domestic
and foreign clients. The rate of input price inflation was
also at the slowest pace in the 15-month series history,"
said Cheryl Paradowski, President and Chief Executive Officer,
PMAC. "Although the overall story from the latest survey
is generally positive, the headline PMI nonetheless ends 2011
at a level below the series average.
The report is available at www.rbc.com/newsroom/pmi.
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For further information, contact:
Royal Bank of Canada
Director, Media Relations
Head of Communications, Canada
RBC Capital Markets
Purchasing Management Association of Canada
President and CEO
Director, Public Affairs & Communications
Telephone +44-20-7264-6283 / +44-782-7891-072
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
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 do 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
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About Purchasing Management Association of Canada
The Purchasing Management Association of Canada (PMAC) is
the leading, and the largest, association in Canada for supply
chain management professionals. With 7,000 members working
across private and public sectors, PMAC is the principal source
of supply chain training, education and professional development
in the country, requiring all members to adhere to a Code
of Ethics. Through its 10 Provincial and Territorial Institutes,
PMAC grants the SCMP (Supply Chain Management Professional)
designation, the highest achievement in the field and the
mark of strategic leadership. For more information please
Markit is a leading, global financial information services
company with over 2,300 employees. The company provides independent
data, valuations and trade processing across all asset classes
in order to enhance transparency, reduce risk and improve
operational efficiency. Its client base includes the most
significant institutional participants in the financial marketplace.
For more information, see www.markit.com.
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 www.markit.com/economics.
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RBC Canadian Manufacturing PMI provided herein is owned by
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in the data, or for any actions taken in reliance thereon.
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or consequential damages, arising out of the use of the data.
Purchasing Managers' Index and PMI
are trade marks of Markit Economics Limited, RBC uses the
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registered trade marks of Markit Group Limited.