TORONTO, Jan. 4, 2016 /CNW/ - The Canadian manufacturing sector experienced another reduction in
output volumes and new business intakes at the end of 2015, with the
latest deterioration in overall conditions the sharpest since October
2010, according to the December 2015 RBC PMI.
There were widespread reports that subdued business confidence had
resulted in lower spending levels and delays to new projects,
particularly in the energy sector. Manufacturers responded to the
latest fall in new work by lowering their inventories and initiating
price discounting strategies. Moreover, payroll numbers decreased for
the sixth month running amid a sharp and accelerated fall in
work-in-hand across the sector.
A monthly survey, conducted in association with Markit, a leading global
financial information services company, and the Supply Chain Management
Association (SCMA), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian
Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI registered 47.5 in December, down from 48.6 in November and below the
neutral 50.0 threshold for the fifth consecutive month. The latest PMI
reading was the lowest in just over five years of data collection,
largely reflecting weaker contributions from the output, new orders and
"Business conditions in the Canadian manufacturing sector fell at a
survey-record pace in December as weaker domestic demand and ongoing
uncertainty in the energy sector continues to take its toll," said Craig Wright, senior vice-president and chief economist, RBC. "Across Canada, Alberta and British Columbia experienced the sharpest
deterioration in conditions, while Ontario continued to be a national
bright spot, posting a sustained rise in output production. As the U.S.
economy strengthens, we expect to see improvements in Canadian
manufacturing sector activity levels."
The headline RBC PMI reflects changes in output, new orders, employment, inventories and
supplier delivery times.
Key findings from the December survey included:
Sharpest deterioration in business conditions since the survey began in
Output, new order volumes and employment all decline at faster rates in
Factory gate charges decrease for the first time since August 2013
Canadian manufacturers signalled a decline in production levels for the
fifth month running in December, which was overwhelmingly linked to
weaker domestic demand patterns. Although new export work picked up
slightly, and at the fastest pace since June, overall volumes of new
work decreased at a survey-record pace. Companies that reported a rise
in export sales generally linked this to support from the weaker
exchange rate, alongside successful efforts to enter new overseas
markets. At the same time, survey respondents noted that falling
domestic demand, especially for investment goods, had driven the
overall decline in workloads at the end of 2015.
Staffing levels were reduced again in December, with the pace of job
cuts accelerating to the fastest recorded since the survey began in
October 2010. Anecdotal evidence suggested that lower payroll numbers
reflected a lack of new work to replace completed projects and, in some
cases, panel members also cited intense pressure on operating margins.
Lower workloads resulted in sustained efforts to reduce inventory
holdings during December. Pre-production stocks and finished goods
inventories both fell during the latest survey period, albeit at a
slower pace than in November. Input buying decreased for the sixth
month running, which contributed to the least marked deterioration in
supplier performance for two-and-a-half years.
Meanwhile, average prices charged by Canadian manufacturers decreased at
a moderate pace in December, which marked the first reduction since
August 2013. Anecdotal evidence suggested that strong competition for
new work had resulted in renewed price discounting at the end of 2015.
At the same time, overall input price inflation eased sharply to its
weakest since January, despite continued upward pressure on costs from
the weaker exchange rate.
Regional highlights include:
Alberta and British Columbia experienced by far the sharpest
deterioration in business conditions
Ontario continued to buck the national trend, recording a sustained rise
in manufacturing output
Lower levels of manufacturing employment were recorded in all regions
"December's survey findings indicate that the Canadian manufacturing
sector faced another difficult month, with overall business conditions
deteriorating at a survey-record pace as falling domestic sales
continued to bite," said Cheryl Paradowski, president and chief executive officer, SCMA. "Another slight rebound in export order volumes was the main positive
development at the end of 2015. The weaker loonie is supporting
manufacturers as they look to enter new export markets, but rising
manufacturing sales abroad have not yet been able to offset falling
workloads from domestic sources and the energy sector in particular."
The report is available at www.rbc.com/newsroom/pmi.
Notes to Editors:
The RBC Canadian 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 Canadian 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 RBC Canadian Manufacturing Purchasing Managers' Index™ (RBC 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
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.
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 Markit. Please contact email@example.com.
Royal Bank of Canada is Canada's largest bank, and one of the largest
banks in the world, based on market capitalization. We are one of North
America's leading diversified financial services companies, and provide
personal and commercial banking, wealth management, insurance, investor
services and capital markets products and services on a global basis.
We employ approximately 81,000 full- and part-time employees who serve
more than 16 million personal, business, public sector and
institutional clients through offices in Canada, the U.S. and 37 other
countries. For more information, please visit rbc.com.
RBC helps communities prosper, supporting a broad range of community
initiatives through donations, sponsorships and employee volunteer
activities. In 2014, we contributed more than $111 million to causes
worldwide, including donations and community investments of more than
$76 million and $35 million in sponsorships.
About Supply Chain Management Association
As the leading and largest association in Canada for supply chain
management professionals, the Supply Chain Management Association
(SCMA) is the national voice for advancing and promoting the
profession. SCMA sets the standard of excellence for professional
skills, knowledge and integrity and was the first supply chain
association in the world to require that all members adhere to a Code
With nearly 8000 members working across the private and public sectors,
SCMA is the principal source of supply chain training, education and
professional development in the country. Through its 10 Provincial and
Territorial Institutes, SCMA grants the Supply Chain Management
Professional (SCMP) designation, the highest achievement in the field
and the mark of strategic supply chain leadership.
SCMA was formed in 2013 through the amalgamation of the Purchasing
Management Association of Canada and Supply Chain and Logistics
Association of Canada. With a combined history of more than 140 years,
today the association embraces all aspects of strategic supply chain
management, including: purchasing/procurement, strategic sourcing,
contract management, materials/inventory management, and logistics and
transportation. For more information, please visit scmanational.ca.
Markit is a leading global diversified provider of financial information
services. We provide products that enhance transparency, reduce risk
and improve operational efficiency. Our customers include banks, hedge
funds, asset managers, central banks, regulators, auditors, fund
administrators and insurance companies. Founded in 2003, we employ
approximately 4,000 people in 11 countries. Markit shares are listed on
NASDAQ under the symbol MRKT. For more information, please see www.markit.com.
Purchasing Managers' Index™ (PMI™) surveys are now available for over 30 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 markit.com/economics.
The intellectual property rights to the RBC Canadian Manufacturing PMI
provided herein are owned by or licensed to Markit. Any unauthorised
use, including but not limited to copying, distributing, transmitting
or otherwise of any data appearing is not permitted without Markit's
prior consent. 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 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 are
licensed to Markit Economics Limited. RBC uses the above marks under
licence. Markit is a registered trade mark of Markit Group Limited.
Image with caption: "RBC PMI: Manufacturing performance drops to a new survey-record low in December (CNW Group/Markit)". Image available at: http://photos.newswire.ca/images/download/20160104_C9714_PHOTO_EN_44590.jpg
For further information:
Royal Bank of Canada
Romina Mari, Manager, Corporate Communications, Canada
RBC Capital Markets
Supply Chain Management Association
Cheryl Paradowski, President and CEO
Amanda Cormier, Director, Public Affairs & Communications
Tim Moore, Senior Economist
Joanna Vickers, Corporate Communications