Purchasing Managers' Index
MARKET SENSITIVE INFORMATION
RBC Canadian Manufacturing Purchasing Managers'
IndexTM finds both output and new order growth
slows sharply in January
February 1, 2012 Production and new orders
increased only modestly in January, 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 - registered 50.6 in January, down sharply from 54.0
in December, and indicated the weakest improvement in Canadian
manufacturing business conditions since data collection began
in October 2010. 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 in January, with firms reporting further output and
new order growth. However, both rates of expansion were only
modest and the weakest since data collection began. Concurrently,
employment fell for the first time in the survey history,
while the rate of input price inflation strengthened to a
Global economic uncertainly, particularly rooted
in the euro zone, weighed heavily on the Canadian manufacturing
sector in the first month of 2012, said Craig Wright,
senior vice-president and chief economist, RBC. "Canada's
modest recovery may be jeopardized if European policymakers
fail to contain the sovereign debt crisis.
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 January survey include:
- Modest rise in total new orders, as new work from abroad
- Net job losses for first time since data collection began
in October 2010
- PMI signals weakest improvement in business conditions
in survey history
Monitored companies partly attributed the improvement in
business conditions to greater client demand. New orders
received by Canadian manufacturers increased further in January,
but growth was only modest and notably slower than that registered
in December. In contrast, new work intakes from abroad fell
solidly during the latest survey period, with almost one-fifth
of respondents reporting lower volumes of new export orders.
Reflective of the rise in total new orders, Canadian manufacturers
raised production and depleted stocks of finished
goods in January. However, output growth was only modest
and the weakest in the 16-month survey history. Backlogs
declined for the fourth consecutive month, with a number of
panellists citing the completion of large projects and weak
growth of incoming new work.
Firms purchased a greater amount of inputs during the latest
survey period, as has been the case since the series started
in October 2010. However, the latest rise in input buying
was only marginal. Stocks of purchases meanwhile were depleted
for the fifth month running in January. Anecdotal evidence
linked the fall in input inventories to leaner stock
holding policies. Suppliers' delivery times continued
to lengthen in January, but the latest increase in lead times
was slightly weaker than that reported in December.
Employment in Canada's manufacturing sector fell for
the first time in the 16-month series history during the latest
survey period. Approximately 17 per cent of firms reduced
their workforces (while 14 per cent hired additional staff),
and generally attributed job losses to the slower rate of
new order growth.
Input costs rose further in January, with panellists reporting
price increases across a wide variety of goods. Notably, the
rate of input price inflation was strong and the fastest
since last August. Firms partly passed on greater cost burdens
to clients by raising their output charges. Although the rate
of output price inflation quickened since December,
it remained slower than its series average.
Regional highlights include:
- Regional PMI data indicated that manufacturing business
conditions improved in Alberta & British Columbia
and Ontario during January.
- Firms in Quebec recorded a fall in new order volumes.
- Employment growth was only reported in Alberta
& British Columbia.
- The rates of input price inflation quickened in all four
regions in January. The strongest increase was posted in
Alberta & British Columbia.
Growth in the Canadian manufacturing sector slowed
sharply in January, with both output and new orders increasing
at the slowest rates in the survey's history. The latter partly
reflected weakness in the global economy, as new export orders
fell solidly from a month earlier," said Cheryl Paradowski,
President and Chief Executive Officer, PMAC. "Meanwhile,
Canadian manufacturers reported a sharp rise in input costs
at the beginning of 2012, even after adjusting for annual
price increases. Raw materials such as metals and resins were
highlighted as having increased in cost.
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
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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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