HS Markit Canada Manufacturing PMI report

Canadian manufacturers experienced a robust and accelerated improvement in overall business conditions in July of 2017.

The latest survey revealed the fastest rate of production growth since March 2017, driven by improved new order books and supported by a further solid rise in employment numbers.

At the same time, input cost inflation moderated to a nine-month low, with manufacturers attributing this to a stronger exchange rate against the U.S. dollar.

Demand for raw materials continued to strengthen, with the latest increase in purchasing activity the fastest since December 2014.

The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 55.5 in July, up from 54.7 in June, to remain above the neutral 50.0 threshold for the seventeenth month running.

Moreover, the latest reading pointed to the strongest improvement in overall business conditions since April.

Faster output growth was a key driver of the upturn in the headline PMI figure in July.

Production volumes were expanded to the largest degree for four months, which survey respondents linked to improved demand and greater willingness to spend among clients.

July data indicated the steepest rise in total new work for three months. There were signs that the accelerated pace of new order growth was driven by domestic spending, as the latest increase in export sales was weaker than in June.

Manufacturing companies responded to rising workloads by hiring additional staff during July. A rebound in employment numbers has been recorded since October 2016, helped by improved business confidence and efforts to rebuild production capacity.

Exactly 40% of the survey panel forecast an expansion of output volumes over the year ahead, while only 5% anticipate a reduction.

Increased production schedules resulted in the fastest rise in input buying for just over two-and-a-half years during July.

Manufacturers also sought to boost their stocks of purchases, although the rate of inventory accumulation was only marginal.

Greater demand for manufacturing inputs continued to place pressure on supply chains.

The latest deterioration in vendor performance was little-changed since June and among the largest seen since early-2014.

Average cost burdens increased sharply in July, but the rate of inflation slowed further from April’s recent peak. So after input price rises contributed to a moderation in output charge inflation for the third month running in July.

Tim Moore, associate director at survey compilers IHS Markit notes: “July data highlighted that Canada’s manufacturing sector maintained an impressive growth rate, as production volumes rose to the second-largest extent since November 2014. Stronger domestic demand was the key factor boosting manufacturing growth in July, reflecting improving economic conditions and rising sales to energy sector clients.“

He continues: “Manufacturers have become more confident that the rebound will be sustained during the next 12 months. The improving business outlook, alongside softer cost pressures, helped to support robust job creation and a renewed focus towards expanding production schedules.”

Regional highlights:

• Alberta & B.C. remained the best performing area for manufacturing growth in July 2017;
• The fastest rises in new orders were recorded in Alberta & B.C., and Ontario.;
• Manufacturing employment increased in all four regions monitored by the survey in July.

Supply Chain Management Association (SCMA) president and chief executive officer Christian Buhagiar says: “ The manufacturing sector moved back on the right track in July, with business conditions improving at the fastest pace for three months. A sharp rebound in sales growth helped to deliver one the strongest rises in production seen since late-2014. Once again, manufacturers in the Alberta and British Columbia region experienced the greatest increases in output and new work.

“July’s survey data revealed widespread efforts to rebuild and expand operating capacity across the manufacturing sector, underpinned by expectations of a continued demand growth over the next 12 months. Reflecting this, employment numbers rose at a solid pace and input buying increased more quickly than at any time since December 2014.

Buhagiar, sums up, “Supply chain pressures and low stocks among vendors remained a concern to manufacturers in July. Survey respondents have reported a sharp lengthening of delivery times for raw materials in recent months, suggesting the greatest squeeze on capacity for around three years.”

About Supply Chain Management Association

The Supply Chain Management Association (SCMA) is Canada’s largest association for supply chain management professionals. It represents 7,500 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 a  principal source of professional development and accreditation in supply chain management in Canada. Visit www.scma.com for more information.

About IHS Markit
IHS Markit 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. IHS Markit is a registered trademark of IHS Markit Ltd. More information at www.ihsmarkit.com.

About PMI

Purchasing Managers’ Index (PMI) surveys are now available for over 30 countries and also for key regions including the eurozone. They are one of the most closely-watched business surveys in the world, favored 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.markit.com/economics.