Purchasing Managers' Index
RBC PMI points to strongest improvement
in manufacturing business conditions for almost a year in
RBC Canadian Manufacturing PMI
- Canadian manufacturing conditions improve considerably in May
June 3, 2013Operating conditions in Canada's
manufacturing sector improved at the strongest pace in 11
months in May, partly reflecting a sharp acceleration in the
rate of new order growth, according to the RBC Canadian
Manufacturing Purchasing Managers’ Index™
(RBC PMI™). 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 - rose to an 11-month
high in May. At 53.2, up sharply from 50.1 in April to a level
broadly in line with the series average, the headline PMI
index was above the 50.0 no-change mark that separates growth
from contraction and consistent with a solid improvement in
Canadian manufacturing operating conditions.
The RBC PMI found that manufacturing
output increased for the first time in three months during
May. The solid rise in production levels was supported by
a much faster expansion of new orders, which also contributed
towards the first increase in backlogs of work for eight months
and encouraged firms to hire additional staff. On the price
front, input costs rose modestly in May, with the rate of
inflation little-changed from April's nine-month low.
"Following the relatively slow pace of expansion
recorded in March and April, the Canadian manufacturing sector
perked up considerably in May, thanks to renewed vitality
in new orders and job creation," said Craig Wright,
senior vice-president and Chief Economist, RBC. "As we
navigate through the remainder of 2013, we expect the sector's
performance to improve further, boosting Canadian growth."
RBC PMI reflects changes in
output, new orders, employment, inventories, prices and supplier
Key findings from the May survey include:
- new order growth accelerates sharply to 11-month high;
- first increase in output for three months; and
- strongest rate of job creation since last August
The volume of new work received by Canadian manufacturers
rose for the second month running in May. Firms generally
reported greater client demand and new contract wins, as well
a further increase in new export order volumes. Overall,
the rate of total new order growth accelerated sharply since
April to an 11-month high.
The solid rise in incoming new work contributed to an increase
in production during May. Notably, this was the first
rise in output in three months, with the rate of growth faster
than the series average.
Concurrently, both the levels of work-in-hand and stocks
of finished goods at manufacturing companies increased
in the latest survey period. Although the rate of accumulation
was modest, it was the first increase in backlogs of work
for eight months.
The quantity of inputs bought by manufacturers rose
for the second month running in May. Meanwhile, stocks
of purchases were depleted further, albeit at the weakest
pace in the current seven-month sequence of contraction. A
number of companies cited a preference for leaner inventories
in the latest survey period.
Suppliers' delivery times lengthened further in May,
partly reflecting raw material shortages at some vendors.
However, the latest increase in lead times was only modest,
with the corresponding index unchanged from April's joint-survey
Manufacturing employment in Canada increased in May,
with approximately 22 percent of firms hiring additional staff
since April. The rate of job creation strengthened to a nine-month
high and was faster than the series average.
Manufacturers reported higher input costs over the
month, with raw materials including wood and metals commonly
recorded as having increased in price. However, the rate of
inflation was only modest and much weaker than the series
average. Panellists passed on greater costs to clients by
raising their output charges, but the increase was
nonetheless the weakest since last July.
- Alberta and British Columbia was the
only region to see a deterioration in manufacturing business
conditions in May, but this was only slight and to a lesser
extent than in April.
- "Following reductions in April, output levels in
both Alberta and British Columbia and Ontario
increased in May.
- Manufacturing companies in Quebec reported the
strongest increase in new export orders.
- Input costs faced by manufacturers in Ontario were
broadly unchanged over the month.
"The RBC PMI rose with spectacular fashion in May,
signalling the strongest manufacturing expansion in 11 months,"
said Cheryl Paradowski, president and chief executive
officer, PMAC. "The headline RBC PMI index improved significantly
over previously disappointing readings in 2013, reflecting
the first increase in output levels in three months and an
accelerated rate of new order growth.
The report is available at www.rbc.com/newsroom/pmi.
- 30 -
For further information, please 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.
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries
operate under the master brand name RBC. We are Canada's largest
bank as measured by assets and market capitalization, and
are among the largest banks in the world, based on market
capitalization. We are one of North America's leading diversified
financial services companies, and provide personal and commercial
banking, wealth management services, insurance, and investor
services and wholesale banking on a global basis. We employ
approximately 80,000 full- and part-time employees who serve
more than 15 million personal, business, public sector and
institutional clients through offices in Canada, the U.S.
and 44 other countries. For more information, please visit
RBC supports a broad range of community initiatives through
donations, sponsorships and employee volunteer activities.
In 2012, we contributed more than $95 million to causes worldwide,
including donations and community investments of more than
$64 million and $31 million in sponsorships.
About Purchasing Management Association
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 2,800 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.
The intellectual property rights to the
RBC Canadian Manufacturing PMI provided herein is owned by
Markit Economics Limited. Any unauthorised use, including
but not limited to copying, distributing, transmitting or
otherwise of any data appearing is not permitted without Markit's
prior consent. Markit shall not have any liability, duty or
obligation for or relating to the content or information ("data")
contained herein, any errors, inaccuracies, omissions or delays
in the data, or for any actions taken in reliance thereon.
In no event shall Markit be liable for any special, incidental,
or consequential damages, arising out of the use of the data.
Purchasing Managers' Index and PMI
are trade marks of Markit Economics Limited, RBC uses the
above marks under licence. Markit and the Markit logo are
registered trade marks of Markit Group Limited.