Purchasing Managers' Index
RBC PMI points to only marginal improvement
in manufacturing business conditions as output stagnates in
RBC Canadian Manufacturing Purchasing
Managers' Index - Manufacturing activity rises marginally
in December, matching November's pace
January 2, 2013 The RBC Canadian Manufacturing
Purchasing Managers' Index (RBC PMI)
indicated only a marginal rise in new order volumes and broadly
no change in output in December. 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
The headline RBC PMI - a composite indicator
designed to provide a single-figure snapshot of the health
of the manufacturing sector - remained at 50.4 for the second
month running in December, signalling only a marginal improvement
in manufacturing operating conditions. The RBC PMI, meanwhile,
averaged 50.7 over the fourth quarter as a whole, down from
52.8 in the third quarter and was the lowest quarterly reading
since data collection began in October 2010.
The RBC PMI found that new orders increased
in December, partly reflecting greater demand and new product
launches, but output levels were broadly unchanged from November.
Meanwhile, employment continued to increase, but the rate
of job creation was at an 11-month low and input prices rose
at the slowest pace since July.
"A weak global economy and a strong loonie have weighed
somewhat on the broader sector and contributed to a flat PMI
reading compared to November," said Craig Wright,
senior vice-president and chief economist, RBC. "That
said, as the cloak of uncertainty is removed from the global
economy in the coming months related to fiscal policy in the
U.S. and elsewhere, we expect that demand for Canadian exports
will rise, as will investment and hiring across the economy."
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 December survey include:
- RBC PMI remains at lowest reading since data collection
began in October 2010;
- output broadly unchanged from November, while new orders
increase only marginally; and
- slowest rate of employment growth since January.
Canadian manufacturers received a larger volume of new
orders in December, after broadly no change in November.
Firms commented on greater client demand and the launch of
new products. That said, the rate of growth was only marginal,
with new export work falling for the second month running.
Despite the rise in new orders, output was broadly
unchanged from one month earlier. Nonetheless, the flat production
trend was an improvement from a modest reduction in the previous
survey period. Concurrently, backlogs of work were
depleted at a marked pace and stocks of finished goods
rose, albeit the rate of inventory accumulation was only marginal.
Employment in Canada's manufacturing sector increased
further during December, with approximately 14% of firms hiring
additional staff since November. Job creation has been reported
in each month since February, but was the weakest in this
sequence of growth.
A marginal increase in the quantity of purchases was
reported by respondents in the latest survey period. That
said, input inventories were depleted and at the strongest
rate since January 2012.
Suppliers' delivery times lengthened further in December,
with panellists commenting on raw material shortages and transportation
delays, particularly with international vendors. However,
the latest increase in lead times was only modest and the
weakest in the 27-month series history.
Manufacturers reported a fifth successive monthly rise in
input costs in December. Although the rate of inflation
was solid, it was nonetheless the slowest in the current sequence
of price increases. Firms passed greater costs on to clients
by raising their output charges. Nonetheless, average selling
prices rose only modestly and at the weakest rate since
Regional highlights include:
- Manufacturing business conditions improved in Alberta
and British Columbia and Ontario in December.
- The strongest rate of new order growth was posted in Ontario.
- Job creation was reported in Alberta and British
Columbia and Ontario, while job losses were reported
- Quebec posted the slowest rate of input price inflation
"The headline RBC PMI index indicated only a marginal
improvement in manufacturing business conditions in December,
with output largely stagnating and new orders increasing only
marginally from November," said Cheryl Paradowski,
president and chief executive officer, PMAC. "Both the
Output and New Orders indices showed improved trends in the
latest survey, but the remaining three components of the PMI
have deteriorated. In particular, the Employment Index pointed
to the weakest rate of job creation in 11 months."
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 +001-917-441-6345 / +001-646-351-3584
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
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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
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