Manufacturing rebound continues, helped by fastest rise in export sales since November 2014
Market research from IHS Markit Canada Manufacturing PMI notes a robust increase in output, new orders and employment.
IHS Markit Canada Manufacturing PMI
IHS Markit Canada Manufacturing Purchasing Managers’ Index
Based on data collected between February 12-22, 2018, IHS Markit Canada Manufacturing PMI says it all points to a relatively strong improvement in overall business conditions, which continued the positive start to 2018 for the manufacturing sector. Robust rises in output and new orders contributed to the sharpest pace of job creation for six months.
At the same time, input buying increased to the largest extent since May 2011, driven by a combination of higher workloads and efforts to boost inventories. Stronger demand for manufacturing inputs and stretched transport capacity resulted in a further sharp lengthening of suppliers’ delivery times during the latest survey period.
At 55.6 in February, the seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) eased only slightly from 55.9 in January and remained well above the 50.0 no-change threshold. Improving business conditions have been recorded in each month since March 2016.
Manufacturing production growth slowed from January’s six-month peak, but remained stronger than the average since the survey began in 2010. Robust rises in output levels were driven by another marked improvement in new business intakes in February. Survey respondents cited improving underlying demand and greater sales to export clients in particular.
New orders from abroad expanded at the strongest rate since November 2014, which manufacturers linked to increased sales to US clients and a more supportive global economic backdrop. However, there were signs of capacity pressures across the Canadian manufacturing sector in February, with backlogs of work accumulating at the steepest pace in almost seven-and-a-half years of data collection. Anecdotal evidence suggested that greater workloads and supply chain bottlenecks were a factor leading to increased volumes of unfinished work.
Efforts to boost operating capacity led to a robust rate of employment growth and the fastest rise in input buying for almost seven years in February. Strong demand for materials in turn led to one of the steepest declines in supplier performance since early-2011. A number of manufacturers noted that new US trucking regulations had added to capacity issues among vendors.
Meanwhile, intense cost pressures persisted in February, with the rate of input price inflation still close to the 43-month peak seen in November 2017. Higher raw material prices and rising staff salaries also contributed to another sharp rise in factory gate charges.
- All regions experienced manufacturing growth in February, led by Alberta and British Columbia;
- Quebec posted its fastest rise in export sales for just over four years;
- Staff recruitment was strongest in Alberta and British Columbia, followed by Ontario
Tim Moore, associate director at survey compilers IHS Markit says: “February data indicates that the manufacturing sector maintained its positive start to 2018. Job creation reached a six-month high and input buying was the strongest since early-2011, suggesting that goods producers are gearing up for a sustained improvement in demand conditions.
“Canadian manufacturers widely commented on feeling a positive impact from the strengthening U.S. economy, which meant that export sales performed particularly well in February.
“However, stronger demand for raw materials resulted in intense pressure on manufacturing supply chains, especially in relation to transportation capacity. Manufacturers noted that logistics bottlenecks had pushed up input costs and encouraged inventory building in February. Meanwhile, greater operating expenses and resilient demand meant that factory gate price inflation held close to its highest seen for seven years.”
Adds Christian Buhagiar, president and chief executive officer, SCMA: “Canadian manufacturers continue to experience robust growth conditions. Of particular note and a key positive development was the pick up in export order books in February. The latest increase in new work from abroad was the fastest for just over three years, helped by supportive global economic conditions and rising demand from U.S. markets in particular.
“A sustained expansion of manufacturing workloads encouraged firms to take on additional staff and expand capacity in February. However, there were signs of growing pains across the manufacturing sector, with sharply rising supplier lead-times contributing to the largest accumulation of incomplete work since the survey began in 2010.
“Purchases of raw materials increased at the strongest rate for almost seven years, which indicates that manufacturers intend to boost production schedules and rebuild inventories in the months ahead.
“The latest survey data revealed that the manufacturing rebound remained broad-based by region. An export-led recovery in Quebec was among the standout developments in February, with manufacturers reporting the strongest upturn in new work from abroad since the start of 2014.”
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.
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 the principal source of professional development and accreditation in supply chain management in Canada. More at www.scma.com.
About IHS Markit
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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, 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.ihsmarkit.com/product/pmi.