- Marginal expansion of output levels in August
- New business growth eases to its slowest since February
- Weakest rise in employment numbers for five months
Markit Canada Manufacturing PMITM (PDF, 568 KB)
Data collected August 12-24
August data signalled a renewed slowdown in output and new business growth across the Canadian manufacturing sector. Survey respondents commented on generally subdued client demand and a further slight reduction in new export work. This contributed to more cautious staff hiring policies in August and the fastest decline in purchasing activity since the start of 2016. Meanwhile, the latest survey signalled a further robust rise in input costs, but average prices charged by manufacturers increased only slightly.
Adjusted for seasonal influences, the Markit Canada Manufacturing Purchasing Managers’ Index™ (PMI™) registered 51.1 in August, down from 51.9 in July, to signal a marginal overall improvement in business conditions. The headline index has now posted above the 50.0 no-change mark for six months running, but the latest reading was the weakest recorded during this period.
Canadian manufacturers pointed to the slowest rise in production levels for six months in August. Anecdotal evidence suggested that subdued demand conditions and strong competition for new work had acted as a brake on output growth. Reflecting this, the latest upturn in new order volumes was much weaker than the 16-month peak seen in April.
Softer growth of incoming new work was linked in part to another drop in export sales, although the rate of decline was only marginal. A sustained fall in new work from abroad during August contrasted with the solid rates of expansion seen earlier in 2016.
In line with the trend for production and new orders, latest survey data pointed to a slower pace of job hiring during August. Higher levels of employment have been recorded for six months running, but the latest expansion was the slowest since March. Some firms noted that uncertainty about the demand outlook had led to more cautious recruitment plans and, in some cases, the non-replacement of voluntary leavers.
Meanwhile, supply chain pressures continued in August, despite another moderate drop in purchasing activity. Longer delivery times were partly linked to low stocks and capacity constraints among vendors. August data also signalled another robust rise in manufacturing input costs, which firms attributed to higher steel prices and exchange rate depreciation. However, the overall rate of cost inflation eased to its slowest since April. At the same time, factory gate charges rose only modestly.
- All regions posted an increase in manufacturing production during August
- Ontario continued to outperform, despite recording its slowest overall improvement in business conditions since February 2015
- Alberta & B.C. experienced its slowest fall in manufacturing employment for just over a year-and-a-half
Tim Moore, Senior Economist at survey compilers IHS Markit:
“The latest PMI survey indicates that Canada’s manufacturing sector continues to struggle for momentum, with production growth easing back to its weakest for six months. A combination of subdued domestic demand and lower new export orders were the main factors weighing on output volumes in August. At the same time, manufacturers indicated a renewed slowdown in job creation, reflecting a lack of pressure on operating capacity and ongoing uncertainty regarding near-term growth prospects.”
Cheryl Farrow, president and chief executive officer, SCMA:
“August was another month of steady but unspectacular growth across Canada’s manufacturing sector. The latest data pointed to the slowest improvement in overall business conditions since the upturn began in March, partly reflecting a weaker contribution to growth from export orders. There were also signs that manufacturers have become more cautious about hiring, reflecting lingering concerns about the demand outlook. There were some encouraging signs across the provinces in the latest PMI figures. After a long downturn, manufacturing firms in Alberta & B.C. indicating a sustained expansion in production volumes during August.”
For further information, please contact:
Tim Moore, Senior Economist
Joanna Vickers, Corporate Communications
Supply Chain Management Association
Cheryl Farrow (Paradowski), President and CEO
Amanda Cormier, Director, Public Affairs & Communications
Note to Editors:
The Markit Canada 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 by company workforce size and by Standard Industrial Classification (SIC) group, based on industry contribution to Canada 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 Markit Canada Manufacturing Purchasing Managers’ Index™ (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.
About Supply Chain Management Association
The Supply Chain Management Association (SCMA) is Canada’s largest association for supply chain management professionals. We represent 7,500 members as well as the wider profession working in roles that cover sourcing, procurement, logistics, inventory, and contract management. SCMA sets the standards for excellence and ethics, and is the principal source of professional development and accreditation in supply chain management in Canada. www.scma.com.
About IHS Markit (www.ihsmarkit.com)
IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.
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