TORONTO, Oct. 1, 2015 /CNW/ - Canadian manufacturers indicated further deterioration in overall
business conditions during September, with output, new business and
employment levels all falling since the previous month, according to
the RBC PMI for September. Weaker demand conditions resulted in lower
input buying and greater efforts to streamline inventories, while
backlogs of work were reduced at the fastest pace since April.
Moreover, the latest survey pointed to stagnating export sales, despite
support from exchange rate depreciation against the U.S. dollar. At the
same time, input prices increased at a robust pace amid widespread
reports of rising costs for inputs purchased from abroad, but factory
gate charges picked up only slightly over the month.
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
At 48.6 in September, down from 49.4 in August, the seasonally adjusted RBC Canadian Manufacturing PMI registered below the neutral 50.0 threshold for the second month
running. Although the index only pointed to a moderate downturn in
overall business conditions, the latest reading was the lowest recorded
in the five-year survey history.
"Overall conditions in the Canadian manufacturing sector continued to
deteriorate in September due to underlying economic conditions,
including renewed downward pressure on the price of oil. Weakness was
primarily concentrated in Alberta and British Columbia, with the rest
of Canada's PMI levels registering above neutral and remaining in
expansion territory," said Craig Wright, senior vice-president and chief economist, RBC. "Despite persisting challenges in the oil and gas sector, we expect the
strengthening U.S. economy to boost Canadian exports and business
conditions over the balance of the year."
The headline RBC PMI reflects changes in output, new orders, employment, inventories and
supplier delivery times.
Key findings from the September survey included:
Production volumes declined for the second month running
Renewed fall in new business levels
Survey-record reduction in input buying as manufacturers sought to
September data indicated a decline in production volumes for the second
consecutive month. The rate of contraction was moderate, but
nonetheless the fastest since March as manufacturers cut back
production schedules in response to lower levels of incoming new work.
Manufacturers indicated a marginal fall in total new business during
September, which ended a three-month period of expansion. Anecdotal
evidence cited a combination of weak domestic demand, alongside
stagnating export sales. The latest data indicated that new work from
abroad was unchanged since August, which contrasted with modest growth
during the previous four months.
A lack of pressure on operating capacity and subdued confidence
regarding the global economic outlook continued to weigh on
manufacturing staffing levels in September. The latest fall in
employment was slightly weaker than in August, with survey respondents
mainly commenting on the non-replacement of voluntary departures.
Softer demand and efforts to alleviate cost pressures resulted in
tighter inventory policies across the manufacturing sector in
September. Reflecting this, stocks of finished goods were depleted for
the fifteenth successive month and pre-production inventories fell at
the steepest pace since the survey began in October 2010. At the same
time, purchasing activity decreased for the seventh time in the past
eight months, with the rate of decline the steepest seen during the
five-year survey history. Despite lower levels of input buying, latest
data signalled further deterioration in supplier performance, which
some manufacturers linked to international shipping delays in
Meanwhile, average cost burdens increased at a strong pace at
manufacturing companies, although the rate of inflation eased slightly
since August. Survey respondents commented on squeezed pricing power,
which led to only a moderate rise in factory gate charges.
Regional highlights include:
Steep declines in output and new orders were recorded in Alberta and
…but solid growth patterns were maintained in Ontario
Manufacturing job creation in Ontario contrasted with subdued employment
Strong input cost inflation was recorded across all regions in September
"September was a very tough month for the manufacturing sector in
Canada. A renewed decline in the volume of new orders contributed to
the sharpest downturn in overall business conditions in the five-year
history of the survey" said Cheryl Paradowski, president and chief executive officer, SCMA. "The weaker loonie has helped export sales in recent months, but this
appears to have softened in September with signs of a slowdown in
demand. There is some good news regionally. Ontario's manufacturing
sector has seen sustained growth in production and job creation, which
contrasts with the trends we are seeing in other parts of the country."
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
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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
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Image with caption: "RBC Canadian Manufacturing PMI™ - RBC PMI: manufacturing sector hits record-low in September (CNW Group/Markit)". Image available at: http://photos.newswire.ca/images/download/20151001_C9913_PHOTO_EN_44271.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