Purchasing Managers' Index™
MARKET SENSITIVE INFORMATION

IHS Markit Canada Manufacturing PMI™

KEY FINDINGS

  • Weakest rises in output and new work for almost two years
  • Robust job creation continues
  • Sharp rise in input costs

Canadian manufacturers reported a sustained upturn in overall business conditions in October, but the rate of improvement slowed for the fourth month running. This was highlighted by a fall in the seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) to 53.9, from 54.8 in September. The latest reading signalled the weakest improvement in manufacturing conditions since January 2017. Softer rates of output and new business growth were the main factors weighing on the headline index
in October.

Production volumes expanded at the slowest pace since December 2016. Survey respondents cited subdued demand from both domestic and export markets. The latest overall upturn in new work was the slowest for just under two years. In contrast to the weaker trend reported for new business growth, latest data revealed another robust increase in manufacturing payroll numbers. Higher staffing levels were attributed to long-term business expansion plans and associated efforts to boost operating capacity.

Intense supply chain pressures continued in October, as signalled by another sharp lengthening of lead times for the delivery of materials from vendors. Anecdotal evidence pointed to transport shortages across North America and shipping delays at ports following typhoons in Asia.

Low stocks and longer delivery times among suppliers encouraged raw materials inventory building across the manufacturing sector during October. Pre-production stocks have increased in each of the past 12 months, although thelatest rise was only marginal. Stocks of finished goods were depleted again, which some firms linked to a more cautious outlook for client demand.

October data pointed to another sharp increase in average cost burdens at manufacturing companies. Survey respondents commented that steel tariffs and rising transportation costs had resulted in higher input prices.

Meanwhile, factory gate charges also increased at a strong pace in October, with the rate of inflation accelerating slightly since the previous month.

Looking ahead, manufacturers are optimistic overall that their production volumes will rise in the next 12 months. However, the degree of positive sentiment continued to moderate from the recent peak seen in April. The latest data signalled the weakest level of positive sentiment since November 2016. Some firms noted that heightened economic uncertainty, particularly in relation to global trade, had weighed on confidence in October.

Meanwhile, regional data indicated that Alberta & British Columbia was by far the strongest area for manufacturing growth during October. Robust rises in production volumes and a sharp pace of job creation underpinned the outperformance of Alberta & British Columbia.

Quebec continued to experience a decline in manufacturing output, partly reflecting lower export sales. In Ontario, manufacturing improved again during October, but at the slowest pace since November 2017.

COMMENT:

Christian Buhagiar, President and CEO at SCMA said:

“October data suggest that manufacturing production growth continued to ease from the elevated rates seen over the summer. More subdued demand in both domestic and export markets contributed to the weakest rise in new order volumes since November 2016. At the same time, input cost inflation remained sharp and delivery times for materials lengthened amid stretched international supply chains.

"Regional data indicated that rising spending across the energy sector has helped to moderate the slowdown in manufacturing growth, with firms in Alberta & British Columbia reporting the steepest rises in output and employment.

"Quebec appears to have felt the soft patch for global trade most keenly, with manufacturers reporting that new export work fell for the second month running in October."

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.

IHS Markit is a registered trademark of IHS Markit Ltd. All other company and product names may be trademarks of their respective owners © 2018 IHS Markit Ltd. All rights reserved.

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.