Purchasing Managers' Index
RBC PMI signals only marginal improvement
in manufacturing business conditions in November
RBC's Craig Wright says economic weak patch
to be short lived
RBC Canadian Manufacturing PMI - Manufacturing
conditions marginally improve in November
December 3, 2012 The RBC Canadian Manufacturing
Purchasing Managers' Index (RBC PMI)
signalled that Canada's manufacturing sector grew only marginally
in November. 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 - fell from 51.4 to 50.4 in November,
and indicated the weakest rate of manufacturing growth since
data were first available in October 2010.
The fall in the RBC PMI partly reflected incoming
new work remaining broadly unchanged from October and the
first contraction in output in 26 months of data collection.
Manufacturers generally cited weak market conditions. Nevertheless,
firms continued to hire additional staff in November, although
the rate of job creation was only modest and the slowest since
"Minimal growth in the manufacturing sector in November
likely reflects the continued global economic uncertainty
and the time-lagged impact of other indicators suggesting
that the Canadian economy weakened during the third quarter,"
said Craig Wright, senior vice-president and chief
economist, RBC. "We expect the economic weak patch to
be short lived, however. As the downside risks plaguing the
global economy start to ease, so will some of the weight on
Canadian export demand and the broader manufacturing sector."
In addition to the headline
RBC PMI, he survey also tracks changes in output,
new orders, employment, inventories, prices and supplier delivery
Key findings from the November survey include:
- RBC PMI falls to lowest level in 26 months of data collection;
- output declines in November, while new orders broadly
unchanged from October; and
- rate of job creation at seven-month low.
The volume of new orders received by Canadian manufacturers
was broadly unchanged from October, with panellists largely
linking this to weak market conditions. New export orders
meanwhile fell modestly and for the first time since February.
The flat new orders trend was one of the factors behind a
fall in production during November. This was the first
reduction in output in 26 months of data collection, but the
rate of decline was only marginal. Stocks of finished goods,
meanwhile, were depleted, in contrast to accumulation one
month previously, and backlogs of work fell sharply
and for the second month running.
Reflective of lower output requirements, the quantity
of inputs bought by manufacturing firms fell during the
latest survey period. Stocks of purchases were also
reduced, with a number of panellists attributing this to leaner
Suppliers' delivery times nonetheless lengthened further
in November, with approximately 11 per cent of firms reporting
increased lead times since October. Respondents suggested
that suppliers were working with less stock and that some
vendors were also affected by Hurricane Sandy.
Manufacturing employment in Canada increased for the
tenth consecutive month in November. Where higher staffing
levels were reported, firms commented on replacing employees
who had recently left. However, the rate of job creation was
only modest and the slowest since April.
Firms reported a further rise in cost burdens during the
latest survey period, with this largely reflective of higher
raw material prices. That said, the rate of input price
inflation was the weakest in three months and slower than
the series average. Manufacturers' selling prices also
increased in November as panellists passed on greater costs
to clients. Despite having quickened since October, the latest
increase in output prices remained modest overall.
Regional highlights include:
- Alberta and British Columbia and Ontario
were the only Canadian regions to post improved manufacturing
operating conditions in November.
- New orders fell in three regions, with only Ontario
recording an increase in new work since October.
- The strongest rate of employment growth was posted in
Alberta and British Columbia.
- Input prices rose at the fastest rate in Alberta
and British Columbia, while the slowest increase
was recorded in Quebec.
"November was one of the most difficult months for Canadian
manufacturers in the past two years, with RBC PMI data showing
a month-over-month fall in production and new order growth
grinding to a halt. This reflected weaker domestic and export
market conditions," said Cheryl Paradowski, president
and chief executive officer, PMAC. "Nonetheless, firms
continued to hire additional staff, although the rate of job
creation slowed for the sixth month running and was only modest."
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 does 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 contact: email@example.com.
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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 2,500 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
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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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