TORONTO, March 1, 2016 /CNW/ - Overall business conditions across the
manufacturing sector moved another step closer to stabilization in
February, according to the latest RBC PMI survey, with output and new
orders both continuing to fall at slower rates than those seen at the
end of 2015.
Greater export sales remained a key factor in providing support to
Canadian manufacturers, as highlighted by a rise in new work from
abroad for the fourth consecutive month. At the same time, the weaker
exchange rate resulted in another robust increase in average cost
burdens, with survey respondents widely commenting on higher prices for
imported materials and a corresponding rise in factory gate prices.
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 49.4 in February, up fractionally from 49.3 in January, but
below the neutral 50.0 threshold for the seventh month running.
Nonetheless, the latest reading was the highest since August 2015,
largely reflecting a softer decline in production levels during
"The U.S. expansion alongside a more competitive Canadian dollar is
continuing to drive stronger export sales and stabilize manufacturing
conditions," said Craig Wright, senior vice-president and chief economist, RBC. "At a regional level, the sharp improvement in Ontario's manufacturing
sector during February was a key factor in raising the Manufacturing
PMI to its highest level since August 2015".
The headline RBC PMI reflects changes in output, new orders, employment, inventories and
supplier delivery times.
Key findings from the February survey included:
Manufacturing PMI rose to its highest level since August 2015
Production levels dropped only slightly in February
New export orders picked up for the fourth month running
Manufacturing output has now declined for seven months running, but the
latest fall was only marginal and the slowest over this period. Where a
drop in production levels was reported, survey respondents commented on
falling new business intakes and, in some cases, efforts to streamline
stocks of finished goods.
Volumes of new work dropped for the sixth consecutive month in February,
which is the longest continuous period since the survey began in
late-2010. Anecdotal evidence pointed to subdued underlying client
spending and an ongoing decline in sales to energy sector clients.
Stronger export sales helped to offset some of the reduction in
domestic demand in February. A number of manufacturers noted that
exchange rate depreciation against the U.S. dollar had boosted new
business intakes from export clients.
Canadian manufacturers remained cautious in terms of input buying in
February, although the latest drop in purchasing activity was the
slowest for eight months. Stocks of purchases increased for the first
time since November 2014, but a number of firms linked this to weaker
than expected demand patterns. Suppliers' delivery times lengthened
slightly during the latest survey period, with worsening vendor
performance partly linked to capacity cutbacks. Meanwhile, a robust
pace of input cost inflation persisted in February, while factory gate
charges increased for the second month running.
Payroll numbers dropped again in February and the rate of job shedding
accelerated slightly from that recorded at the start of 2016. Survey
respondents generally noted that a lack of pressure on operating
capacity had resulted in hiring freezes and the non-replacement of
voluntary leaves. At the same time, manufacturers reduced their stocks
of finished goods in February, in part reflecting efforts to improve
cash flow through tighter inventory management.
Regional highlights include:
Alberta and B.C. experienced the steepest deterioration in manufacturing
sector performance, while Ontario registered an accelerated upturn in
Higher levels of manufacturing employment in Ontario contrasted with
sustained job shedding in Alberta and B.C and Quebec
Price discounting persisted among manufacturers in Alberta and B.C,
while factory gate charges increased in all other areas monitored by
"Ontario's manufacturing sector continues to lead the way in Canada. The
weak Loonie is powering export growth, but also contributing to the
biggest growth in output costs in the province since 2011. The West of
Canada continues to find it tough under the burden of low oil prices.
Surprisingly Quebec continues to struggle despite good export growth
due to weak domestic demand," said Cheryl Farrow, president and chief executive officer, SCMA. "In Canada as a whole business conditions in manufacturing have now
almost stabilized. Manufacturers still appear cautious about the
near-term business outlook, with hiring freezes and efforts to chip
away at inventories of finished goods persisting."
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 SCMA.com.
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provided herein are owned by or licensed to Markit. Any unauthorised
use, including but not limited to copying, distributing, transmitting
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Image with caption: "RBC PMI: Slowest deterioration in manufacturing conditions for six months (CNW Group/RBC)". Image available at: http://photos.newswire.ca/images/download/20160301_C9891_PHOTO_EN_44638.jpg
For further information:
Royal Bank of Canada
Catherine Hudon, Director, Corporate Communications, Canada
Supply Chain Management Association
Cheryl Farrow (Paradowski), President and CEO
Amanda Cormier, Director, Public Affairs & Communications
Tim Moore, Senior Economist
Joanna Vickers, Corporate Communications