Purchasing Managers' Index
Canadian manufacturing business conditions
deteriorate for first time in two-and-a-half years: RBC PMI
RBC Canadian Manufacturing Purchasing
Managers' Index - Canada's manufacturing conditions
deteriorated in March for first time in survey history
April 2, 2013The March RBC Canadian
Manufacturing Purchasing Managers' Index (RBC
PMI) signalled the first deterioration
in manufacturing business conditions since data collection
began in October 2010, with monthly declines reported for
both output and new orders. 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
The headline RBC PMI - a composite
indicator designed to provide a single-figure snapshot of
the health of the manufacturing sector - fell below the 50.0
no-change mark that separates growth from contraction in March.
This was the first sub-50 reading in the two-and-a-half year
survey history. At 49.3, down from 51.7 in February, the RBC
PMI was consistent with a marginal rate of contraction in
The RBC PMI found that both the
levels of output and new orders were lower in March compared
with one month previously. A number of firms linked this to
weak client demand. The reduced workloads also contributed
to a slower rate of job creation. Meanwhile, on the price
front, the rate of input cost inflation was strong and faster
than in February, but remained slower than the series average.
"The deterioration in the Canadian manufacturing measure
is surprising in the face of improving growth in both the
U.S. and various emerging economies. However, uncertainty
about resolving fiscal imbalances in the U.S. - with sequestration
going ahead March 1 - and in the Euro-area may have weighed
on sentiment," said Craig Wright, senior vice-president
and chief economist, RBC. "This weak spot should be short-lived,
however, as we expect that global demand for Canadian exports
will recover, providing a welcome boost for domestic manufacturers."
RBC PMI reflects changes in
output, new orders, employment, inventories, prices and supplier
Key findings from the March survey include:
- RBC PMI falls below the 50.0 no-change mark that
separates growth from contraction;
- both output and new orders fall modestly in March; and
- employment growth slows.
Canadian manufacturers received a lower volume of new
orders in March. Firms generally linked the reduction
to weak client demand, both at home and abroad, with new
export work also having fallen since February. Although
moderate, the rate of decline in total new orders was the
sharpest in the 30-month series history.
Reflective of lower new work intakes, manufacturing firms
reduced their output in the latest survey period. Production
has fallen in three out of the past five months, with the
latest reduction moderate. Concurrently, stocks of finished
goods were depleted, albeit only marginally, and backlogs
of work fell further and at a faster rate than one month
Following no change in purchasing volumes in February, the
quantity of inputs bought by manufacturers fell in
March. However, the rate of decline was only slight. Input
inventories, meanwhile, fell for the fifth successive
month, partly reflecting leaner stock holding requirements.
Suppliers' delivery times lengthened further in March.
Anecdotal evidence suggested that vendors were working with
lower inventories, with some suppliers also experiencing transportation
problems. Overall, the increase in lead times was modest,
but to a lesser extent than in February.
Manufacturing employment in Canada continued to increase
in March. However, the rate of growth eased since hitting
a four-month high in February. Approximately 14 per cent of
firms hired additional staff in the latest survey period,
while 10 per cent reduced their workforces.
Input costs faced by manufacturers rose further in March,
with higher raw material prices and unfavourable exchange
rates contributing to the latest increase. Overall, the rate
of input price inflation was strong and faster than
in February. Meanwhile, output charges also increased
over the month, with the latest rise the greatest for almost
Regional highlights include:
- Three regions saw a deterioration in manufacturing business
conditions in March. The rates of contraction were moderate
in both Alberta and British Columbia and Ontario,
but marginal in Quebec.
- Production fell at the sharpest rate in Alberta
and British Columbia.
- The strongest rate of contraction in new orders was recorded
- Job losses were reported in Alberta and British
Columbia, but employment growth was recorded elsewhere
"The Canadian manufacturing sector took a turn for
the worse in March, seeing a deterioration in overall operating
conditions for the first time in the survey's two-and-a-half
year history," said Cheryl Paradowski, president
and chief executive officer, PMAC. "Highlighting weak
demand both domestically and in key export markets, manufacturers
reported month-over-month declines in output and new orders
in March, and they responded by scaling back hiring."
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
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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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are now available for 32 countries and also for key regions
including the Eurozone. They are the most closely-watched
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