Purchasing Managers' Index
RBC PMI falls to three-month low in
July as new order growth slows
RBC Canadian Manufacturing PMI
- Canada's manufacturing conditions improved for the fourth
consecutive month in July
August 1, 2013Manufacturing business conditions
in Canada improved for the fourth consecutive month in July;
however, the rate of growth was modest and the weakest in
three months, 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 manufacturing sector.
At 52.0, the headline RBC PMI - a composite
indicator designed to provide a single-figure snapshot of
the health of the manufacturing sector - remained above the
50.0 no-change mark for the fourth successive month in July,
signalling a further improvement in Canadian manufacturing
business conditions. However, down from 52.4 to a three-month
low, the headline index indicated a modest expansion that
was weaker than the series average.
The RBC PMI indicated ongoing growth of both
output and new orders in July, with firms generally attributing
this to greater client demand and new product launches. However,
the rates of growth eased to three-month lows and this contributed
to a weaker rise in employment. Meanwhile, firms reduced their
output charges for the first time since March 2012, often
linking discounting to stronger competitive pressures.
"Canada's manufacturing sector stayed afloat in July,
although conditions were slightly less favourable than on
average historically," said Craig Wright, senior
vice-president and chief economist, RBC. "We expect the
U.S. economy to shift into higher gear in the second half
of the year, slowly increasing demand for Canada's exports,
and manufacturing goods in particular - this is good news
for overall GDP growth."
RBC PMI reflects changes in
output, new orders, employment, inventories, prices and supplier
Key findings from the July survey include:
- modest increases in both output and new orders;
- weakest rate of job creation since April; and
- average selling prices fall at strongest pace in near
three-year series history.
The volume of new orders received by Canadian manufacturers
increased for the fourth consecutive month in July. Firms
generally linked this to greater client demand, in part due
to new product launches, with new export work also
rising over the month. Though remaining moderate overall,
the rate of total new order growth was the weakest since April.
Reflective of the latest increase in new work, manufacturers
raised output and depleted existing stocks of finished
goods. That said, the latest rise in production was the
weakest in the current three-month sequence. Meanwhile, backlogs
of work fell solidly and for the second month running.
Concurrently, the quantity of inputs bought by manufacturing
companies increased during the latest survey period. Although
this mostly reflected higher new orders, part of the rise
in purchasing volumes was also used to build input inventories.
Stock of purchases rose for the first time since October
2012, albeit only marginally.
Suppliers' delivery times lengthened in July, after
having shortened slightly in June. Nonetheless, the deterioration
in vendor performance was only modest and weaker than the
Employment in Canada's manufacturing sector continued
to rise in July. Approximately 17 per cent of surveyed firms
hired additional staff over the month, often linking this
to increases in new business. Overall, the rate of job creation
was moderate, but slowed further from May's peak to the weakest
in three months.
Manufacturers faced greater input costs in July, with
higher raw material prices and unfavourable exchange rates
behind the latest increase. Overall, the rate of inflation
was moderate and the fastest since March. In contrast, companies
reduced their output charges from June, with a number
of firms citing stronger competitive pressures. The reduction
in selling prices was modest and the first for almost a year-and-a-half.
- Alberta and British Columbia was the only region
to see deterioration in manufacturing business conditions
in July, although this was only slight.
- Manufacturers based in Ontario saw a marginal reduction
in new order volumes.
- Employment increased in three regions during July, with
the only exception being Alberta and British Columbia
that saw broadly no change from June.
- The weakest rise in input costs was recorded for Quebec.
"The Canadian manufacturing sector remained in expansion
mode at the start of the second half of the year, with greater
demand supporting ongoing growth of new orders and output,"
said Cheryl Paradowski, president and chief executive
officer, PMAC. "However, the manufacturing expansion
still remains fragile, as indicated by the RBC PMI falling
to a three-month low that was lower than the series average."
The report is available at www.rbc.com/newsroom/pmi.
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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 direction.
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.
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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
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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
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