Markit Canada Manufacturing PMI™
Purchasing Managers' Index™
MARKET SENSITIVE INFORMATION
- Production growth picks up from June’s three-month low
- Modest rise in new work, despite renewed fall in export sales
- Robust pace of input cost inflation continues in July
Markit Canada Manufacturing PMI (PDF, 580 KB)
Source: IHS Markit
Canadian manufacturers indicated another improvement in business conditions during July, underpinned by modest rises in output, new orders and employment levels. However, there were signs of weaker demand from export markets, as highlighted by a renewed drop in new work from abroad. Meanwhile, exchange rate depreciation against the U.S. dollar continued to push up overall input costs in July, with survey respondents citing higher steel prices in particular.
The headline figure derived from the survey is the Markit Canada Manufacturing Purchasing Managers’ Index™ (PMI™), which is designed to provide timely indications of changes in prevailing business conditions in the Canadian manufacturing sector. PMI readings above 50.0 signal an improvement in business conditions, while readings below 50.0 signal deterioration.
At 51.9 in July, the seasonally adjusted Markit Canada Manufacturing PMI was up fractionally from 51.8 in June and above the neutral 50.0 value for the fifth consecutive month. This signalled a moderate improvement in overall business conditions, but the latest reading was still weaker than the average since the survey began in October 2010 (52.5).
July data indicated a sustained expansion of manufacturing production levels, which continued the upward trend seen in each month since March. Survey respondents attributed the latest upturn in output to stronger inflows of new work, especially from domestic clients. Measured overall, new work expanded at a moderate pace that was slightly faster than June’s four-month low. However, export sales acted as a drag on total new orders in July, which some firms linked to softer demand from clients in Asia. Reflecting this, new work from abroad decreased for only the second time in 2016 so far, and the rate of contraction was the fastest for nine months.
Payroll numbers increased again in July, which extended the current period of jobs growth to five months. The latest rise in staffing levels was the joint-fastest since December 2014. Survey respondents linked additional staff recruitment to new product launches and efforts to expand into new markets.
In contrast to the positive trend seen for employment levels in July, latest data signalled that purchasing activity was broadly unchanged since the previous month and pre-production stocks increased only fractionally. Moreover, inventories of finished goods were lowered for the fourth month running, which some firms linked to uncertainty about the business outlook.
On the prices front, the latest survey indicated a robust rise in average cost burdens, despite the pace of inflation easing slightly since June. Meanwhile, factory gate charges increased moderately, which firms mainly linked to greater imported raw material costs.
- Manufacturing output expanded in all regions monitored by the survey in July
- The fractional rise in production in Alberta & B.C. ended a 17-month period of decline
- Job creation was strongest in Ontario and ‘Rest of Canada’
Commenting Tim Moore, Senior Economist at survey compilers Markit:
“Canada’s manufacturing sector remained in expansion mode during July, which meant that business conditions continued to rebound from the soft patch seen at the start of the year. Production volumes have now picked up for five months running, supported by a sustained improvements in new order books.
"Greater demand from domestic sources helped to offset slower export sales in July, especially for manufacturers of consumer goods. However, among investment goods producers the uncertain global economic outlook and weak energy sector spending continued to cast a shadow over business expansion plans and job hiring.”
Cheryl Farrow, president and chief executive officer, SCMA:
“The good news from July’s survey was that Alberta & B.C. saw manufacturing production rise for the first time since the start of 2015. It is also the first time all Canada’s regions have seen growth in manufacturing since 2014. Improving domestic demand helped to drive that recovery and create jobs at the start of the third quarter.
“A renewed drop in new export sales was the main drag on manufacturing performance in July. Survey respondents pointed to heightened global economic uncertainty and subdued demand across Asia in particular.”
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
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 SCMA.com.
About IHS Markit (www.ihsmarkit.com)
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