Purchasing Managers' Index™
MARKET SENSITIVE INFORMATION

IHS Markit Canada Manufacturing PMI™

KEY FINDINGS:

  • Headline PMI eases to its lowest since January 2017
  • Softer rates of output and new order growth
  • Export sales stagnate at the end of 2018

Manufacturing PMI

Canadian manufacturers experienced a renewed slowdown in growth at the end of 2018, with both production volumes and incoming new work expanding at softer rates than in November. The pace of manufacturing job creation also moderated in December, partly reflecting a drop in business optimism to its weakest since February 2016.

At 53.6 in December, down from 54.9 in November, the headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) signalled the weakest improvement in overall business conditions since January 2017.

A moderation in output growth to its slowest for two years was a key factor weighing on the headline PMI in December. Survey respondents commented on less favourable demand conditions, particularly in the energy sector. There were also reports that global trade frictions had held back export sales during the latest survey period.

New business volumes continued to rise in December, but at one of the slowest rates seen over the past two years. This partly reflected a stagnation in export sales.

Latest data indicated that new work from abroad was broadly unchanged in December, which ended a 12-month period of sustained expansion. Some firms noted a drag on export competitiveness from higher raw material costs (particularly steel). There were also reports that export demand from US clients had lost momentum.

Despite softer rates of output and new business growth, the latest survey revealed an accelerated rise in unfinished work. Higher backlogs of work have been recorded for three months running, driven by ongoing capacity pressures.

Manufacturers continued to add to their workforce numbers in December, but the rate of job creation slowed from the survey-record peak seen in the previous month. Anecdotal evidence suggested that less upbeat projections for output growth had acted as a brake on staff hiring at some firms.

Business optimism moderated to its weakest for almost three years in December. Reports from survey respondents indicated that concerns about the domestic economic outlook had weighed on business expectations for 2019. Some manufacturers also noted that global trade tensions had the potential to hold back growth in the next 12 months.

Meanwhile, input cost inflation eased to its lowest since August 2017. Manufacturers noted that lower oil-related prices had helped to offset pressure on costs from rising prices for metals. Factory gate charges also increased at a slower pace in December. There was an alleviation of pressure on supply chains at the end of 2018, with lead times for manufacturing inputs lengthening to the least marked extent since April 2017.

Regional data highlighted broad-based manufacturing growth across Canada, with Quebec recording the fastest improvement in business conditions. However, there was a marked loss of momentum in Alberta & British Columbia as manufacturers indicated the weakest overall growth since late-2016.

Output Index

COMMENT: 

Christian Buhagiar, President and CEO at SCMA said:

“December data signalled a loss of momentum for manufacturers at the end of the year, with stagnating export sales and softer energy sector demand the key factors behind an overall slowdown in production growth. Survey respondents also commented that global trade tensions has led to greater risk aversion among clients. As a result, manufacturing companies have curtailed their expectations for output growth in 2019, with business optimism easing to its lowest for almost three years. "Quebec was a notable outperformer in December as manufacturing conditions improved at the fastest pace for four months. Meanwhile, manufacturers in Ontario saw softer overall growth than in November, while those based in Alberta & British Columbia experienced the weakest upturn for just over two years."

 

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.

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