Purchasing Managers' Index™
MARKET SENSITIVE INFORMATION
IHS Markit Canada Manufacturing PMI™
- Weakest upturn in overall business conditions since December 2016
- Softer jobs growth offsets slight rebound in new orders
- Production levels rise at moderate pace in February
Subdued business conditions persisted across the Canadian manufacturing sector in February, with the latest survey data pointing to the slowest rise in employment numbers since the start of 2017. At the same time, growth of production volumes and incoming new work remained among the weakest seen over the past two years, although the latter accelerated since January.
The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) dropped from 53.0 in January to 52.6 in February, which signalled the slowest overall improvement in business conditions since December 2016. A softer rate of job creation and stagnating pre-production inventories were the key factors holding back the Manufacturing PMI in February. A slight rebound in new order growth was the main positive contribution to the headline index.
February data signalled only a modest increase in production volumes, with the rate of expansion only fractionally stronger than January's 25-month low. New business volumes increased at a slightly faster pace than at the start of the year, but the latest rise was still one of the weakest seen since the second half of 2016.
Reports from survey respondents suggested that subdued client demand had held back manufacturing output growth in February. A number of firms noted that global trade frictions and heightened economic uncertainty had led to delayed decision-making among clients. Moreover, some manufacturers commented that higher cost burdens amid rising prices for steel-intensive items had dampened competitiveness in export markets. On a more positive note, there were also reports that strong demand from US clients had helped to support overall new export order volumes in February.
Manufacturers continued to signal an accumulation of unfinished business at their plants in February. Some firms suggested that adverse weather conditions had disrupted supply chains and contributed to increased backlogs of work. That said, the latest downturn in supplier performance was the least marked since April 2017, which manufacturers linked to greater stocks among vendors and softer demand for materials. Input buying increased at the weakest pace for more than one year. Moreover, stocks of purchases dipped slightly in February, which ended 15 months of sustained inventory building.
Staffing levels rose at the slowest rate since January 2017. Manufacturers noted that softer client demand in recent months and tight labour market conditions had held back employment growth. There were also pressure on margins from rising costs had constrained job creation. However, latest data indicated that input price inflation moderated to its lowest since September 2016. Where a rise in costs was reported, this was mainly linked to trade tariffs on metals.
Regional data indicated that Ontario experienced the strongest overall improvement in business conditions during February, while Alberta & British Columbia posted the weakest upturn.
Christian Buhagiar, President and CEO at SCMA said:
“Canadian manufacturers experienced a slowdown in overall business conditions during February, with weaker employment growth the main factor weighing on the headline PMI reading.
“Production growth was relatively subdued, reflecting a sustained soft patch for incoming new work so far this year. Survey respondents noted that trade frictions and heightened global economic uncertainty had led to delayed decision-making among clients on new orders.
“The main positive developments were signs of reduced pressure on supply chains and a fall in input cost inflation to its lowest since September 2016. The latest deterioration in vendor performance was the least marked for almost two years, despite reports that adverse weather conditions had caused some disruption to supply chains in February."
For further information, please contact:
Joanna Vickers, Corporate Communications
Supply Chain Management Association™
Lynne Coles, Vice President, Growth and Chief Marketing Officer
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.
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)
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