Purchasing Managers' Index
RBC PMITM suggests a slightly weaker expansion of Canada's manufacturing sector in August
RBC Canadian Manufacturing PMI - Slightly weaker expansion of manufacturing sector in August
September 4, 2012 Canada's manufacturing sector grew in August, although at its weakest pace in five months, according to the RBC Canadian Manufacturing Purchasing Managers' Index (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), the RBC PMI 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 - indicated a solid improvement in Canadian manufacturing business conditions in August. However, having fallen slightly from 53.1 in July to 53.0, the PMI remained below the series average of 54.2 and signalled the weakest manufacturing expansion in five months.
The RBC PMI indicated further increases in both output and new orders in August. However, the rate of output growth was unchanged from July's four-month low, while the expansion for new orders remained below the series average. Employment also increased over the month, but the rate of job creation slowed slightly to its weakest since April. Input prices meanwhile increased in August, reversing the marginal decline in July.
"In contrast to declining manufacturing conditions around the world, particularly in the U.S., Euro area and China, the Canadian manufacturing sector is continuing to grow, albeit at a moderately slower pace," said Craig Wright, senior vice-president and chief economist, RBC. "It is encouraging to see that new export orders rebounded and manufacturing firms reported that they continued to hire employees in August, which may provide a favourable early indication in advance of the broader Canadian employment report due out on Friday."
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 August survey include:
- growth of output unchanged from July's four-month low;
- new orders increase solidly, partly reflecting an uptick in new export work; and
- input prices rise solidly, reversing marginal decline recorded one month previously.
The volume of new orders received by Canadian manufacturers increased in August, with firms generally linking this to greater client demand. New export orders also rose over the month, with an increase in new work from the U.S. particularly mentioned by panellists. Overall, total new orders rose solidly from July, although the rate of growth remained slower than the series average.
Reflective of the rise in new work intakes, manufacturers across Canada raised their production levels in August. Output has risen in each month since data collection began in October 2010, but the rate of increase was unchanged from the four-month low recorded in July. Firms also depleted stocks of finished goods, albeit to a lesser extent than one month previously, and reduced the level of outstanding business for the third month running.
The amount of inputs bought by surveyed companies increased in August, with firms largely linking the rise in purchases to greater output requirements. Input inventories also rose over the month; however, the rate of stock accumulation was only slight overall. Concurrently, suppliers' delivery times lengthened further during the latest survey period. However, the increase in input lead times was only marginal and the weakest in the 23-month series history.
Manufacturing employment in Canada increased for the seventh consecutive month in August, with approximately 18 per cent of firms hiring additional staff compared to July. Panellists generally attributed this to recent increases in new orders. Although remaining solid overall, the rate of job creation nonetheless slowed to its weakest since April.
In contrast to the marginal reduction recorded in July, input costs faced by Canadian manufacturers increased in August. Increased prices for fuel, wood and steel were all particularly mentioned by respondents. Overall, the rate of inflation was the strongest in three months. Firms partially passed on the increase in cost burdens to clients by raising their output charges. However, selling prices rose only modestly, despite the rate of increase hitting a four-month high.
Regional highlights include:
- Alberta & British Columbia and Quebec saw weaker manufacturing expansions in August.
- All four regions posted increases in new orders; however, the slowest rate of growth was reported by firms operating in Ontario.
- Ontario posted the weakest rise in employee headcounts during August.
- Alberta & British Columbia posted the strongest rate of input price inflation in August.
"Although the Canadian manufacturing sector grew at its weakest pace since March, the slowdown was less severe than in July and the pace of expansion remained solid overall," said Cheryl Paradowski,
President and Chief Executive Officer, PMAC. "An uptick in new export orders, reflecting greater demand from the U.S., contributed to a faster expansion in total new orders in August. However, the increase in new work did not translate into a stronger rise in production, with output growing at the same rate as in July."
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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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
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For more information, see www.markit.com.
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