Purchasing Managers' Index
RBC PMI falls to four-month low as both
output and new order growth slows
RBC Canadian Manufacturing PMI
- Canada's manufacturing sector continues to grow in December
January 2, 2014 - Manufacturing business conditions
in Canada continued to improve in December, albeit at the
weakest pace since August, 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 Supply Chain Management Association (SCMA),
the RBC PMI offers a comprehensive and early indicator
of trends in the Canadian manufacturing sector.
After adjusting for seasonal variation, the RBC PMI
- a composite indicator designed to provide a single-figure
snapshot of the health of the manufacturing sector - registered
53.5 in December and, above the 50.0 no-change mark, indicated
a solid improvement in Canada's manufacturing business conditions.
However, down from 55.3 in November to a four-month low, the
RBC PMI suggested that the rate of growth had slowed further
from its recent two-and-a-half year peak.
The RBC PMI showed that new business rose strongly
in December, supporting a further increase in production.
However, the rate of new order growth eased sharply to a four-month
low. Concurrently, employment increased at a modest pace that
was the slowest since April. Input prices, meanwhile, rose
at the strongest pace for nine months, but the rate of inflation
remained weaker than the series average.
"While output and new order growth ebbed in December
following a particularly strong month in November,
Canada's manufacturing sector continued to grow, registering
a solid 53.5," said Paul Ferley, assistant chief economist,
RBC. "Our outlook for 2014 is underpinned by the
assumption that Canadian exports will firm as the U.S. continues
on a path of recovery - this will provide a healthier environment
for manufacturing to further grow in the New Year."
RBC PMI reflects changes in output, new orders, employment,
inventories, prices and supplier delivery times.
Key findings from the December survey include:
- RBC PMI signals solid improvement in manufacturing business
- output and new order growth eases from their recent two-and-a-half
year peaks; and
- slowest rate of job creation since April.
The volume of new orders received by Canadian manufacturers
increased for the ninth consecutive month in December. Panellists
generally commented on greater client demand, both domestically
and in key export markets such as the United States. Overall,
the rate of new order growth was strong but, having eased
over the month, the weakest since August.
Reflective of higher new order requirements, firms raised
production and increased their inventories of finished
goods during December. That said, output rose at a much
weaker pace compared with November, with a number of firms
citing production problems. Concurrently, backlogs of work
fell for the first time in four months, albeit marginally.
The quantity of inputs bought by manufacturers rose
at a moderate pace in December, with firms often linking this
to increased output. Companies also reduced their existing
input inventories, with this the first stock depletion
since August. Suppliers generally struggled with greater demand
for inputs in the latest survey period. Consequently, lead
times for inputs continued to lengthen, with the latest
increase strong and the greatest for 20 months.
Manufacturing employment in Canada rose for the twenty-third
consecutive month in December. However, after adjusting for
seasonal factors, the rate of job creation eased to an eight-month
low, which was also weaker than the series average.
Canadian manufacturers recorded a further increase in costs
during December. Higher fuel and raw material prices were
commonly reported by panellists, while other respondents also
mentioned that unfavourable exchange rates pushed up the cost
of imports. Overall, the rate of inflation was strong and
the fastest in nine months.
Firms passed on greater costs to clients by raising their
selling prices in the latest survey period. The increase in
output charges was moderate and to a greater extent than one
month previously, but weaker than the rise in costs.
- Output increased across all four regions, led by Ontario.
- New order growth eased sharply in Alberta and British
- Quebec was the only region to see lower employment,
although the decline was only marginal.
- Input price pressures strengthened across all four regions
"Despite having dipped to a four-month low in December,
the RBC PMI continued to suggest that the manufacturing sector
has moved past the weakness at the start of the year. Importantly,
new orders continued to rise strongly, suggesting that overall
growth will be sustained moving into 2014," said Cheryl
Paradowski, president and chief executive officer, SCMA.
"The Employment Index continued to disappoint, showing
the weakest increase since April, which was also below trend."
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
Supply Chain Management Association
President and CEO
Public Affairs & Communications
Telephone +44-207-260-2047 / +44-7815-812-162
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:
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About Supply Chain Management Association
As the leading and largest association in Canada for supply
chain management professionals, the Supply Chain Management
Association (SCMA) is the national voice for advancing and
promoting the profession. SCMA sets the standard of excellence
for professional skills, knowledge and integrity and was the
first supply chain association in the world to require that
all members adhere to a Code of Ethics.
With nearly 8000 members working across the private and public
sectors, SCMA is the principal source of supply chain training,
education and professional development in the country. Through
its 10 Provincial and Territorial Institutes, SCMA grants
the Supply Chain Management Professional (SCMP) designation,
the highest achievement in the field and the mark of strategic
supply chain leadership.
SCMA was formed in 2013 through the amalgamation of the Purchasing
Management Association of Canada and Supply Chain and Logistics
Association of Canada. With a combined history of more than
140 years, today the association embraces all aspects of strategic
supply chain management, including: purchasing/procurement,
strategic sourcing, contract management, materials/inventory
management, and logistics and transportation. For more information,
please visit scmanational.ca.
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Purchasing Managers' Index (PMI) surveys
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including the Eurozone. They are the most closely-watched
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to provide up-to-date, accurate and often unique monthly indicators
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RBC Canadian Manufacturing PMI provided herein are owned by
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