TORONTO, Nov. 2, 2015 /CNW/ - The latest RBC Canadian Manufacturing PMI
survey pointed to another downturn in overall business conditions, with
output, new orders and employment all declining since the previous
month. Moreover, new export sales dropped for the first time since
April, with survey respondents noting that weaker global economic
conditions had weighed on new business volumes.
Meanwhile, input costs rose at a sharp and accelerated pace in October,
which placed pressure on operating margins and contributed to a further
slight increase in factory gate charges.
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 posted 48.0 in October, down from 48.6 in September and below the
neutral 50.0 threshold for the third month in a row. Moreover, the
latest reading signalled the sharpest rate of deterioration since the
survey began in October 2010.
"Heightened global economic uncertainty and ongoing energy price
weakness continues to weigh on the Canadian manufacturing sector, as
indicated by October's record-low reading of 48.0," said Craig Wright,
senior vice-president and chief economist, RBC. "As we move toward the
end of the year, we expect that a strengthening U.S. economy and weaker
Canadian dollar will fuel demand for Canada's exports, resulting in a
shift to positive growth territory."
The headline RBC PMI reflects changes in output, new orders, employment, inventories and
supplier delivery times.
Key findings from the October survey included:
Sharpest deterioration in business conditions since the survey began in
Production levels fell at a steeper rate in October, despite softer
decline in new orders
Manufacturing employment numbers decreased for the fourth consecutive
A faster reduction in manufacturing output levels was the main factor
contributing to a drop in the headline index during October, as new
business volumes decreased at a slightly slower pace than one month
previously. Manufacturers linked the survey-record fall in production
levels to a combination of weaker underlying demand and efforts to
reduce their stocks of finished goods. Reflecting this, latest data
indicated the sharpest decline in post-production inventories since the
survey began five years ago.
At the same time, manufacturers pared back their input buying for the
fourth month running in October, which contributed to the fastest fall
in stocks of purchases in the survey history.
Overall volumes of new work decreased slightly in October, but the rate
of decline eased since September and was broadly in line with the
average so far in 2015. That said, for the first time in six months,
manufacturers reported a decrease in export sales. Meanwhile, backlogs
of work were lowered again during October, reflecting a general lack of
pressure on operating capacity.
Canadian manufacturers indicated a modest reduction in their payroll
numbers during the latest survey period, thereby continuing the trend
seen throughout much of the year to date. Anecdotal evidence suggested
that staffing levels were mainly reduced through the non-replacement of
voluntary leavers. Some firms also commented on additional measures to
avoid forced job cuts at their plants, including work-share
arrangements and greater efforts to boost productivity.
Suppliers' delivery times lengthened across the manufacturing sector in
October, as has now been the case for almost two-and-a-half years.
Survey respondents suggested that international shipping delays,
alongside capacity cuts among local suppliers, had led to longer lead
times for inputs. The latest survey also pointed to upward pressure on
input prices, with overall cost burdens rising at the second-fastest
pace since July 2014. Manufacturers overwhelmingly linked higher input
costs to exchange rate depreciation against the U.S. dollar.
Regional highlights include:
Alberta and British Columbia remained by far the worst performing region
Quebec experienced a renewed deterioration in manufacturing sector
Ontario and the Rest of Canada continued to record an overall upturn in
Manufacturers in all regions reported a sharp and accelerated rise in
their average input costs
"The lack of spending by Canada's oil and gas sector, and weak economic
conditions abroad, made October a very tough month for Canada's
manufacturing sector. October saw the sharpest fall in manufacturing
production in at least five years, and the overall performance of the
sector has dropped to yet another record low" said Cheryl Paradowski, president and chief executive officer, SCMA. "This latest fall in production was made worse by manufacturers
cutting into their inventories, as the fall in new orders from Canadian
manufacturers has levelled off since September. Despite these
challenges, we see evidence that employers have tried to limit job cuts
as much as possible through initiatives like work-share arrangements,
and want to retain their staff in anticipation of future growth.
"The provincial picture remains very mixed. In Alberta and BC,
manufacturers saw demand fall sharply and have aggressively cut prices
to maintain market share. Ontario's manufacturing sector continues to
perform pretty well, with the weaker loonie and rising U.S. demand
driving exports and helping to sustain production growth."
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 firstname.lastname@example.org.
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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.
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Image with caption: "RBC Canadian Manufacturing PMI™ RBC PMI: Manufacturing sector dips to record low in October (CNW Group/Markit)". Image available at: http://photos.newswire.ca/images/download/20151102_C9139_PHOTO_EN_44354.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