Purchasing Managers' Index
RBC PMITM shows slower manufacturing
growth rate in July
August 1, 2012 After registering strong growth
Canada's manufacturing sector slowed to a four-month low in
July, 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 - signalled a solid improvement in Canadian manufacturing
business conditions during July. However, at 53.1, down from
54.8 in June and below the series average of 54.2, the headline
index indicated the weakest improvement since March.
The RBC PMI found that the volume of new orders received
by Canadian manufacturers rose in July, with this generally
linked to greater client demand. However, new orders, as well
as output, grew at sharply reduced rates compared to June.
Employment increased at the slowest pace since April, though
the rate of job creation remained solid overall, while the
average price paid for inputs fell for the first time since
"Canada's manufacturing sector continued to grow in July,
albeit at a slower pace, suggesting global growth worries
are weighing on the economy. Employment improved for the sixth
consecutive month in the sector, with 21 per cent of firms
hiring additional staff, largely driven by increased production,"
said Craig Wright, senior vice-president and chief
economist, RBC. "As manufacturing conditions remain positive
overall, we anticipate that further gains in employment and
a pick-up in exports will support Canada's GDP growth in 2012."
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 July survey include:
- New orders and output grow, albeit at sharply reduced
- Solid increase in headcounts, but rate of job creation
at three-month low; and
- Average input costs fall for first time in 22-month series
The volume of new orders received by Canadian manufacturers
increased in July, continuing the trend that has been recorded
in each month since the inception of the survey. Approximately
32 per cent of firms reported an increase in new work, with
this generally linked to greater client demand. However, new
export orders rose only marginally, partly reflecting
weakness in the global economy. Subsequently, total new work
intakes grew at a sharply reduced rate during the latest survey
Reflective of the rise in new orders, production increased
further during July. Although moderate, output growth was
the slowest in four months. Meanwhile, firms depleted their
stocks of finished goods, with a number of companies
using existing inventories to fulfil some new order requirements.
Concurrently, backlogs of work fell for the second
month running and to a greater extent than in June.
Manufacturers raised their purchases and increased
their input inventories in July. Firms have accumulated
stocks of purchases for four months running, but the latest
increase was the weakest in this sequence. Suppliers' delivery
times meanwhile lengthened further during July. Panellists
suggested that vendors struggled with capacity issues. The
latest increase in lead times was moderate, but to a lesser
extent than in the previous survey period.
Employment in Canada's manufacturing sector rose for
the sixth consecutive month in July. Approximately 21 per
cent of firms hired additional staff since June, largely citing
the increase in production. Although remaining solid, the
rate of job creation nonetheless slowed to a three-month low.
The average price paid for inputs fell for the first
time in the 22-month series history during July, albeit marginally.
Survey respondents reported lower prices for raw materials
such as steel and resin. Output charges meanwhile rose
for the fourth consecutive month in July, but the increase
in selling prices was the weakest in the current sequence
Regional highlights include:
- Manufacturing operating conditions improved in all four
Canadian regions in July. Quebec posted the strongest
month-on-month improvement, while the weakest was reported
- The volume of new orders received by manufacturers based
in Ontario was unchanged from that recorded one month
previously, but growth was recorded elsewhere.
- Staffing levels increased in all four regions during July.
The weakest rate of job creation was reported in Ontario.
- " July data indicated that average input costs fell
in three regions. The only exception was Alberta &
British Columbia, which saw a slight increase.
"Although the survey data pointed to a slower manufacturing
expansion in July, with new export orders rising only marginally
over the month, this can partly be attributed to weakness
in the global economy," said Cheryl Paradowski,
President and Chief Executive Officer, PMAC. "Average
input prices, meanwhile, fell for the first time in the 22-month
series history, as surveyed firms reported lower prices for
raw materials such as steel, aluminum, resin and packaging."
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
Communications Manager, 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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