Purchasing Managers' Index™
MARKET SENSITIVE INFORMATION

IHS Markit Canada Manufacturing PMI™

 

KEY FINDINGS:

  • Headline PMI dips below the 50.0 no-change mark in April
  • Production drops to greatest extent since December 2015
  • Export sales continue to fall

PMI May 2019

April data revealed a downturn in business conditions across the Canadian manufacturing sector for the first time in more than three years. The weaker performance mainly reflected modest reductions in output, new orders and employment during the latest survey period. Manufacturers responded to softer customer demand by cutting back their input buying and streamlining their inventories in April. On a more positive note, input cost inflation remained much softer than the peaks seen last summer, despite pressure from rising transportation costs.

The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) dropped from 50.5 in March to 49.7 in April, to signal a slight deterioration in overall business conditions. Moreover, the latest PMI reading was the lowest since February 2016.

Manufacturing production declined for the first time in two-and-a-half years, although the rate of contraction was only modest. Reports from survey respondents suggested that the fall in output reflected a realignment of production schedules with softer client demand.

New work decreased for the second month running in April, which marked the first back-to-back fall in manufacturing sales since the beginning of 2016. Companies noted that less favourable economic conditions in both domestic and external markets had acted as a brake on new business volumes. Export orders have now decreased in four of the past five months, although the rate of decline eased since March. Manufacturers continued to suggest that a general slowdown in global trade and heightened business uncertainty had dampened customer demand.

Weaker order books contributed to reduced pressure on operating capacity in April. This was highlighted by a marked decline in backlogs of work, with the rate of contraction the sharpest since December 2015. Manufacturing firms indicated greater caution in terms of their staff hiring during the latest survey period, with overall payroll numbers falling for the first time since September 2016. However, the rate of decline in employment levels was only fractional.

Tighter inventory management policies were signalled in April, with both stocks of inputs and finished goods inventories both declining across the manufacturing sector. The drop in pre-production stocks was achieved through the fastest reduction in purchasing activity for just over three years.

Softer demand for inputs contributed to relatively subdued cost pressures in April, although the rate of inflation edged up form March's 39-month low. A number of firms cited both exchange rate factors and higher transportation costs. At the same time, competitive pressures held back factory gate price inflation, with the latest rise in output charges still much weaker than the seven-year peak recorded last summer.

Regional data indicated that Quebec was the best performing area for manufacturing business conditions in April, followed by Ontario. The main bright spots for export sales were Alberta & British Columbia, with a rebound in new work from abroad contrasting with the declines seen elsewhere in April.

PMI May 2019

COMMENT:

Christian Buhagiar, President and CEO at SCMA, said:

“April data illustrates another loss of momentum for the manufacturing sector, following the sharp slowdown in growth seen during the first quarter of 2019. The latest survey indicates that overall business conditions deteriorated to the greatest extent in over three years as manufacturers cut back production and staff hiring in response to weaker sales.

“Canadian manufacturers reported subdued demand conditions in both domestic and external markets during April, which was often linked to a slowdown in global trade volumes and more cautious spending among clients.

“Worsening export order books were recorded in all regions except Alberta & British Columbia during April, with manufacturers in Ontario experiencing the greatest reduction."

For further information, please contact:

IHS Markit
Tim Moore, Associate Director
Telephone +44-1491-461-067
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Joanna Vickers, Corporate Communications
Telephone +44-207-260-2234
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Supply Chain Management Association™
Lynne Coles, Vice President, Growth and Chief Marketing Officer
Telephone 416-542-3860
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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 the voice of Canada’s supply chain, representing and serving more than 7,000 professionals across the country, as well as the wider supply chain community. SCMA is a federation, with a national secretariat and 10 provincial/territorial Institutes. Its mission is to “provide leadership to the Canadian supply chain community, provide value to all members, and advance the profession.” Through its education, advocacy and resource-development initiatives, the association endeavours to advance its vision, to see that “Canadian supply chain professionals and organizations are recognized for leading innovation, global competitiveness and driving economic growth.” Its Supply Chain Management Professional (SCMP) designation is Canada’s most-sought-after professional designation for those entering the field and advancing as leaders in supply chain. 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.