Manufacturing PMI hits three-month high, driven by a survey-record rise
- Slight rebounds in output and new order growth
- Strongest job creation since survey began eight years ago
- Input cost inflation eases to nine-month low
LONDON–(BUSINESS WIRE)–Christian Buhagiar, President and CEO at SCMA said:
“Canadian manufacturers enjoyed an overall rebound in growth during
November, with business conditions improving at the strongest pace for
three months. Stronger rises in output and new orders were supported by
the fastest upturn in employment numbers since the survey began in
October 2010. The latest robust increase in staffing levels was widely
linked to capacity pressures and a subsequent rise in investment
spending across the manufacturing sector.
“Survey respondents commented on a boost to sales from improving U.S.
economic conditions. However, there were also signs that worldwide trade
frictions continued to hold back client demand, with new export order
growth still weaker than seen on average in the first half of the year.
Canadian manufacturers signalled that business optimism remained close
to the lowest seen over the past two years, which many linked to
heightened global economic uncertainty.”
November data pointed to a positive month overall for the Canadian
manufacturing sector, although growth rates for output and new orders
remained softer than seen on average in the third quarter of 2018. The
most encouraging aspect of the latest survey was a strong and
accelerated upturn in job creation, which manufacturers attributed to
rising business investment in plant capacity.
Additionally, input cost inflation moderated in November, with lower
oil-related prices helping to offset higher costs for imported materials
The headline seasonally adjusted IHS Markit Canada Manufacturing
Purchasing Managers’ Index® (PMI®) registered 54.9 in November, up from
53.9 in October, to signal the sharpest improvement in business
conditions since August.
Manufacturing production growth edged up from October’s 22-month low,
helped by a stronger upturn in new order books. Latest data also
signalled a solid rise in export sales, with survey respondents mainly
commenting on rising sales to U.S. clients. Nonetheless, the overall
rate of new export order growth remained softer than seen in much of the
first half of 2018.
Despite a slowdown in demand conditions relative to earlier in the year,
manufacturers reported a renewed acceleration of employment growth in
November. The latest expansion of payroll numbers was the fastest since
the survey began in October 2010. Anecdotal evidence suggested that
efforts to alleviate capacity constraints had encouraged greater
business investment and additional staff recruitment.
Intense supply chain pressures continued in November, as signalled by
another sharp lengthening of delivery times for raw materials. Survey
respondents cited low stocks among suppliers and ongoing shipping delays
for items imported from Asia. Concerns about raw material availability
led to another moderate increase in stocks of purchases across the
Canadian manufacturing sector during November. However, latest data
signalled the weakest rise in input buying since the end of 2017, partly
reflecting more subdued projections for client demand.
Manufacturers remain optimistic overall about their growth prospects for
the next 12 months. However, the degree of confidence was up only
slightly since October and still among the weakest seen over the past
two years. Some firms noted that slower economic growth in Europe had
weighed on business sentiment in November.
Meanwhile, there were positive developments in terms of inflationary
pressures during November. Input costs increased at the slowest rate
since February, which meant that factor gate price inflation remained
much softer than the survey-record highs seen during the summer.
Canadian manufacturers revealed a slight rebound in production growth
from the 22-month low seen during October. However, the seasonally
adjusted Output Index signalled that the latest rise in production
volumes remained only modest in comparison those seen on average in the
third quarter of 2018.
New order books improved in November, which continued the upward trend
seen during each month since October 2016. The latest expansion of
incoming new work was faster than in the previous month, but still among
the weakest seen since the start of 2017. Manufacturing firms noted that
global trade frictions had contributed to less favourable underlying
New Export Orders
Export sales growth remained slightly stronger than that seen for
overall new orders in November. A number of survey respondents cited
improving U.S. economic conditions. The seasonally adjusted New Export
Orders Index signalled that export sales growth was faster than in
October, but still weaker than seen during the first half of the year.
Backlogs of Work
Backlogs of work continued to accumulate at a much slower rate than the
survey-record pace seen in the middle of the year. The marginal increase
in work-in-hand (but not yet completed) was mainly attributed to
capacity pressures and supply chain disruptions during the latest survey
Stocks of Finished Goods
November data pointed to a stabilisation of finished goods inventories
across the manufacturing sector, which ended a seven-month period of
decline. Survey respondents noted that softer demand growth in recent
months had alleviated downward pressure on post-production stocks.
In contrast to the relatively subdued growth patterns recorded for
output and new work, latest data signalled an accelerated rise in
payroll numbers at manufacturing companies. The seasonally adjusted
Employment Index signalled the fastest rate of job creation since the
survey began in October 2010. Anecdotal evidence suggested that greater
investment in plant capacity continued to drive up staffing levels in
Quantity of Purchases
The seasonally adjusted Quantity of Purchases Index signalled another
solid expansion of input buying at manufacturing firms during November.
That said, the rate of growth eased for the fourth month running to its
weakest since December 2017. Some panel members noted that concerns
about the demand outlook had weighed on purchasing activity during the
latest survey period.
Suppliers’ Delivery Times
Manufacturers signalled another steep lengthening of delivery times for
their purchases from vendors in November. The seasonally adjusted
Suppliers’ Delivery Times Index has posted below the neutral 50.0
threshold for almost five-and-a-half years. Survey respondents widely
commented that shipping delays and stretched supply chain capacity had
led to worsening raw material availability in November.
Stocks of Purchases
Pre-production inventories were accumulated for the thirteenth
consecutive month in November, although the rate of expansion remained
only modest. Manufacturers reporting an increase in their stocks of
purchases generally cited efforts to mitigate against delays in the
receipt of raw materials from suppliers.
Input cost inflation eased a nine-month low in November and remained
much softer than the peak levels seen in the middle of 2018. Higher cost
burdens were mainly linked to exchange rate factors, alongside the pass
through of U.S. tariffs on steel and aluminium. That said, lower
oil-related prices helped to moderate the overall rate of input cost
inflation in November.
Mirroring the trend for input costs, latest data signalled a further
slowdown in output charge inflation from the peaks seen earlier this
year. The seasonally adjusted Output Prices Index remained well above
the the 50.0 no-change mark, but indicated the weakest rate of factory
gate price inflation since March.
Business optimism picked up slightly in November, but remained among the
lowest seen over the past two years. Expectations of rising production
were linked to rising business investment and forecasts of improving
demand from U.S. clients. However, manufacturers also noted that global
trade frictions and softer economic growth in Europe were factors that
had weighed on business confidence.
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