Purchasing Managers' Index
Improved manufacturing conditions in March boost RBC PMITM to highest level so far this year
April 2, 2012 Operating conditions in Canada's manufacturing sector strengthened in March, 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 52.4 in March, up from 51.8 in February, signalling 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 new orders and output both increased further in March, reflective of greater client demand. However, production growth was nonetheless the second-weakest in the 18-month survey history. Job creation was at a four-month high in March, while the rate of input price inflation eased since February.
"Activity in the Canadian manufacturing sector has been bucking the general trend of softening conditions, particularly in Europe and Asia," said Craig Wright, senior vice-president and chief economist, RBC. "Canadian manufacturers will continue to benefit from the strengthening U.S. economy, which started 2012 on a much more promising note. We expect to see continued demand for key Canadian exports, such as autos, machinery and lumber, south of the border, with real exports returning to pre-recession peak levels in 2013."
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 March survey include:
- Output and new orders both increase modestly in March
- Fastest rate of job creation since last November
- Average selling prices fall for first time in 18-month series history
Firms generally linked the latest improvement in business conditions to greater client demand. Incoming new work rose modestly in March, with the latest expansion the strongest in three months. Moreover, new export orders also increased over the month, albeit fractionally, in contrast to declines reported in January and February.
Reflective of greater client demand, Canadian manufacturers raised production during the latest survey period. Output has increased in each month since data collection began in October 2010, but the latest rise was nonetheless the second-weakest in this sequence of growth. Panellists also depleted stocks of finished goods to help fulfil new order requirements, while backlogs of work fell moderately overall.
The amount of inputs purchased by monitored companies increased in March, albeit marginally and at the weakest pace in the 18-month series history. Meanwhile, input inventories were depleted for the seventh consecutive month. A number of panellists cited leaner stock holding policies. Concurrently, suppliers' delivery times lengthened further in March. Anecdotal evidence suggested that vendors struggled to meet greater demand for inputs during the latest survey period.
Employment in Canada's manufacturing sector rose solidly in March. Approximately one-fifth of respondents hired additional staff (while 11 per cent reduced their workforces), with the overall rate of job creation the strongest since last November.
Canadian manufacturers reported higher input costs in March, with fuel, steel and resin all particularly mentioned as having increased in cost. Although the rate of input price inflation remained strong, it was nonetheless the weakest in three months. Meanwhile, firms reduced their selling prices during the latest survey period, largely commenting on stronger competitive pressures. Notably, this was the first reduction in factory gate prices in 18 months of data collection.
Regional highlights include:
- PMI data signalled that manufacturing business conditions improved in all four regions in March. The weakest monthly improvement was registered in Alberta & British Columbia, however.
- New order volumes increased at the fastest pace in Quebec, but were broadly unchanged in Alberta & British Columbia.
- Job creation was registered in all four regions during March.
- The fastest rate of input price inflation was reported by manufacturers in Ontario.
"Following the sharp slowdown in January, growth in the Canadian manufacturing sector continued to recover in March. New orders increased at the fastest pace in 2012 so far, helped by greater client demand. However, the latest improvement in overall business conditions was modest, with output growth the second-slowest in 18 months of data collection," said Cheryl Paradowski, President and Chief Executive Officer, PMAC. "Input cost inflation eased in March, while Canadian manufacturers reduced their selling prices slightly."
The report is available at www.rbc.com/newsroom/pmi.
- 30 -
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
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries
operate under the master brand name RBC. We are one of Canada's
largest banks as measured by assets and market capitalization,
and are among 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, corporate
and investment banking and transaction processing services
on a global basis. We employ approximately 74,000 full- and
part-time employees who serve close to 15 million personal,
business, public sector and institutional clients through
offices in Canada, the U.S. and 56 other countries. For more
information, please visit www.rbc.com.
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.
The intellectual property rights to the
RBC Canadian Manufacturing PMI provided herein is owned by
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 trade marks of Markit Economics Limited, RBC uses the
above marks under licence. Markit and the Markit logo are
registered trade marks of Markit Group Limited.