Purchasing Managers' Index™
MARKET SENSITIVE INFORMATION

IHS Markit Canada Manufacturing PMI™

Key findings:

  • Headline PMI dips to nine-month low
  • Slower rates of output and new order growth
  • Input cost inflation moderates

September data pointed to slower overall growth across the Canadian manufacturing sector, largely reflecting weaker rises in production volumes and incoming new work. A robust rate of job creation was maintained in September as manufacturers sought to boost operating capacity and reduce their backlogs of work. Meanwhile, longer delivery times from suppliers continued to influence purchasing strategies, as highlighted by another marked rise in stocks of inputs at manufacturing firms.

The seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) dropped from 56.8 in August to 54.8 in September, to signal the slowest improvement in overall business conditions since December 2017.

Production growth was the weakest for five months in September, which survey respondents attributed to a combination of capacity constraints and subdued demand conditions. New work expanded at the least marked pace for 11 months. Manufacturers noted that global trade frictions continued to hold back export sales growth. Backlogs of work declined for the first time since August 2017. This contrasted with the survey-record rise in unfinished business seen in June. Manufacturers noted that additional staff recruitment in recent months had helped to alleviate capacity pressures at their plants.

Staffing levels increased at a robust pace in September, which marked two years of sustained job creation across the manufacturing sector. Survey respondents linked higher payroll numbers to greater business investment and forthcoming new product launches.

September data signalled another marked deterioration in vendor performance, which was attributed to stretched transport capacity and shortages of stock at suppliers. That said, the latest lengthening in input delivery times was the least severe since January.

Manufacturers responded to longer lead times from suppliers by increasing their stocks of inputs in September. The rate of inventory building eased only slightly from August's surveyrecord high. 

A strong rate of input cost inflation continued in September, with manufacturers reporting higher prices for steel, aluminum and electronic components. That said, the overall rise in cost burdens was the least marked since February. At the same time, surcharges for metals contributed to another robust increase in average prices charged by manufacturers in September.

Meanwhile, manufacturers indicated that their near-term growth expectations slipped to the lowest in 2018 so far. Survey respondents frequently cited concerns about global trade frictions, alongside a lack of suitably skilled candidates to fill vacancies at their plants.

Regional data indicated that only Alberta & British Columbia bucked the overall slowdown recorded in September, with business conditions improving at a robust pace. Ontario and Quebec both recorded softer overall rates of expansion, largely reflecting a weaker contribution from new order growth.

Comment:

Christian Buhagiar, President and CEO at SCMA said:

“Canadian manufacturers reported a loss of momentum in September as new order growth eased back to its lowest since October 2017. Survey respondents noted that global trade frictions had held back export sales and resulted in more cautious spending patterns among clients.

"Supply chains remained under pressure in September as vendors struggled to keep up with demand. Manufacturers' efforts to build safety stocks added to the squeeze on supply chain capacity.

"The regional breakdown of data revealed that Ontario and Quebec bore the brunt of the slowdown in September. Alberta & British Columbia experienced the strongest improvement in business conditions, which suggests that greater demand from the energy sector has helped to moderate the overall slowdown in manufacturing growth."

 

For further information, please contact:

IHS Markit
Joanna Vickers, Corporate Communications
Telephone +44-207-260-2234
E-mail This email address is being protected from spambots. You need JavaScript enabled to view it.

Supply Chain Management Association™
Lynne Coles, Vice President, Growth and Chief Marketing Officer
Telephone 416-542-3860
Email This email address is being protected from spambots. You need JavaScript enabled to view it.

Note to Editors:

The IHS 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 IHS 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.

IHS 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 IHS Markit. Please contact This email address is being protected from spambots. You need JavaScript enabled to view it..

About Supply Chain Management Association™

The Supply Chain Management Association (SCMA)™ is Canada’s largest association for supply chain management professionals. We represent 7,000 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 expertise to forge 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 85 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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About PMI

Purchasing Managers’ Index® (PMI™) surveys are now available for over 40 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.ihsmarkit.com/product/pmi.

The intellectual property rights to the IHS Markit Canada Manufacturing PMI™ provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS 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 IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index® and PMI™ are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trademark of IHS Markit Ltd.