Purchasing Managers' Index
RBC Canadian Manufacturing Purchasing Managers'
IndexTM finds output and new order growth remain modest in February
March 1, 2012 Production and new orders increased further in February, albeit modestly, 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 51.8 in February, up from 50.6 in January, and signalled a modest 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 both new orders and output increased in February. The rates of growth were modest, however, and the second-weakest in 17 months of data collection. Meanwhile, Canadian manufacturers hired additional staff in February, in contrast to job losses in January, and the rate of input price inflation strengthened to a six-month high.
"While we observed a modest improvement from January's sharp slowing, the Canadian manufacturing sector's growth rate remained tepid in February," said Craig Wright,
senior vice-president and chief economist, RBC. "On a more promising note, the slight uptick in manufacturing employment is in line with our view that Canada's broader labour market will shake off its recent slump and start to ramp up again in the months ahead."
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 February survey include:
- Production growth strengthens, but still second-slowest in 17-month survey history
- Manufacturers hire additional staff, in contrast to job losses in January
- Rate of input price inflation fastest since last August
Firms largely linked the improvement in Canadian manufacturing business conditions to greater client demand. Approximately 22 per cent of panellists received a larger volume of new orders during the latest survey period, with growth modest overall. In contrast, new export orders fell for the second month running, with the rate of decline the sharpest since the survey began in October 2010.
Reflective of larger new order requirements, Canadian manufacturers raised production and depleted stocks of finished goods in February. Output rose modestly, and at a rate stronger than that registered in the previous survey period. Concurrently, outstanding business was broadly unchanged in February, with the majority of respondents (almost two-thirds) reporting no-change from January.
Monitored companies bought a larger amount of inputs during the latest survey period. Moreover, input inventories were reduced for the sixth month running. Anecdotal evidence generally attributed gains in purchases to higher new work intakes. Meanwhile, suppliers' delivery times lengthened in February, and to the greatest extent in three months. Firms suggested that vendors had difficulty in sourcing key raw materials during the latest survey period.
In contrast to job losses reported in January, Canadian manufacturers hired additional staff in February. Where job creation was reported, panellists generally commented on increases in new work intakes. Overall, employment growth was modest, and weaker than the series average.
Input costs faced by Canadian manufacturing companies increased further during February. Raw materials such as steel and fuel were particularly mentioned by panellists as having increased in price. The rate of input price inflation was marked and the strongest since August 2011. Firms passed greater cost burdens on to clients by raising their output charges. Factory gate prices grew solidly, and at a rate broadly similar to that recorded in January.
Regional highlights include:
- PMI data signalled that manufacturing business conditions improved in three regions during February, with Quebec the only exception.
- Incoming new work increased to the greatest extent in Ontario.
- Alberta & British Columbia reported the fastest rate of employment growth in February.
- Rates of input price inflation strengthened in all four regions, with the strongest rise in input costs reported by firms based in Alberta & British Columbia.
"Although both output and new orders increased in February, and at faster rates than in January, the expansions were modest and the second-weakest in the survey's history. Panellists particularly mentioned higher costs for steel and fuel, with the overall rate of input price inflation the strongest since August 2011," said Cheryl Paradowski, President and Chief Executive Officer, PMAC. "Better news came from the Employment Index that indicated a rise in net jobs, reversing some of the losses reported previously."
The report is available at www.rbc.com/newsroom/pmi.
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For further information, contact:
Royal Bank of Canada
Head of Communications, Canada
RBC Capital Markets
Manager, Media Relations
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
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including the Eurozone. They are the most closely-watched
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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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