Purchasing Managers' Index™
MARKET SENSITIVE INFORMATION
IHS Markit Canada Manufacturing PMI™
- Business conditions decline for second month in a row
- New orders fall at fastest rate in over three years
- Input price inflation at 51-month low
Canada's manufacturing sector saw operating conditions worsen again in May. Production continued to contract amid the sharpest drop in new orders since December 2015. More positively, employment saw a fractional increase after a slight dip in April, whilst input price inflation eased to its slowest rate in over four years.
The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) dropped from 49.7 in April to 49.1 in May, signalling a second successive monthly deterioration in business conditions. The latest PMI reading was the lowest in nearly three-and-a-half years, albeit still indicating only a slight downturn.
All components of the headline index, bar employment, had a downward impact on the figure. Output contracted at the most marked rate since the end of 2015. Panellists linked this to falling new orders and subdued global trade conditions.
Correspondingly, total new manufacturing orders dropped for the third month running and at the sharpest rate in this period. Firms noted weaker demand in both domestic and foreign markets. Some firms also cited a negative impact on sales from lower construction activity.
Manufacturers reacted by paring back input purchases for the third consecutive month, albeit at a modest and relatively unchanged pace since April. This led to a slight reduction in pre-production stock levels, while inventories of finished goods were broadly stable.
Conversely, workforce numbers increased marginally in May, reversing the mild drop last month. This was partly linked to expansion of factory space, countering the drag from softer production levels.
Supply chain performance deteriorated at only a slight pace, registering the smallest increase in delivery times for over three years. Some firms noted a shortage of raw material supply leading to longer delays.
On the price front, Canadian manufacturing firms registered the weakest inflation of input costs in over four years, and the joint-softest for nearly six years. Despite this, panellists highlighted a number of price rises, including fuel, resin and foodstuff charges. Tariffs from the U.S. also inflated cost burdens, which firms then passed on to customers through a solid uptick in output charges.
Looking ahead, manufacturing companies remained upbeat regarding future output. In fact, the level of optimism climbed to the highest in 13 months, despite the current slowdown in the sector. Firms noted that a number of factors aided their positive expectations, such as new products, hiring plans and factory expansion, while also citing signs of a turnaround in the wider economy.
Meanwhile, latest data pointed to deteriorating business conditions across all regions monitored by the survey. Ontario registered the sharpest downturn in manufacturing performance during May, partly reflecting a survey-record decline in new export sales.
For further information, please contact:
Tim Moore, Associate Director
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.
May 2019 data were collected May 13-24, 2019.
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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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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