TORONTO, June 1, 2015 /CNW/ - The latest RBC Canadian Manufacturing Purchasing Managers' Index™ (RBC PMI™) survey highlighted that manufacturing production grew in May, ending a
three-month period of back-to-back declines. A stabilization in export
orders provided support to the manufacturing sector during the latest
survey period, although overall volumes of new work continued to
decrease. Meanwhile, input cost inflation eased to its lowest since
January, despite widespread reports that exchange rate depreciation
contributed to upward pressure on imported raw material 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
At 49.8 in May, up slightly from 49.0 in April, the RBC Canadian Manufacturing PMI reached its highest level since January, but still signaled a
fractional deterioration in overall business conditions. A modest
increase in production levels was the main positive influence on the
headline index in May.
"It's encouraging to see a slight improvement in business conditions for
Canada's manufacturing in May, even though significant improvements
didn't generate enough traction to shift the sector into positive
growth territory," said Craig Wright, senior vice-president and chief economist, RBC. "Moving into the second half of the year, we expect a strengthening
U.S. economy and a weakening in currency will fuel demand for Canada's
exports, which should have a positive effect on manufacturers."
The headline RBC PMI reflects changes in output, new orders, employment, inventories and
supplier delivery times.
Key findings from the May survey include:
A modest rebound in production volumes
Export sales stabilized, but overall new orders decreased at modest pace
A slight drop in manufacturing employment numbers
Anecdotal evidence suggested that signs of stabilization in client
spending patterns, especially in export markets, encouraged
manufacturers to boost their output levels. Although total new work
dropped in May, the rate of decline moderated from the survey-record
pace seen in April. Survey respondents noted that exchange rate
depreciation helped to support export order wins at their plants.
However, a number of firms continued to report that falling capital
spending among clients in the energy sector weighed on overall demand
conditions in May.
The latest data indicated a further slight reduction in manufacturing
payroll numbers, which extended the current period of net job shedding
to five months. Companies that lowered their staffing levels generally
cited restructuring efforts in response to reduced workloads. May data
signaled a fall in backlogs of work across the manufacturing sector for
the sixth month running.
Softer underlying demand contributed to cautious inventory policies at
manufacturing firms in May. Stocks of finished goods and pre-production
inventories both continued to decrease during the latest survey period.
Moreover, the rate of decline in input stocks was the second-fastest
since November 2010.
Average lead times from suppliers lengthened again in May, despite a
further reduction in input buying across the manufacturing sector. That
said, deterioration in vendor performance was the least marked in
nearly two years.
On the prices front, average cost burdens increased for the
thirty-fourth month running in May. Manufacturers commented on higher
prices for a range of raw materials, especially steel. However, the
overall rate of input cost inflation moderated to its lowest level
since January. Factory gate charges rose at a marginal pace in May,
with a number of firms commenting that strong competitive pressures had
contributed to an erosion of operating margins. Nonetheless, the
overall rate of output charge inflation across the manufacturing sector
edged up to a three-month high in May.
Regional highlights include:
Deteriorating overall business conditions were largely confined to
Alberta and British Columbia
Manufacturers in Alberta and British Columbia posted sharp falls in
output, new orders and employment
Business conditions were broadly stable in Quebec, and improved markedly
in Ontario and the 'Rest of Canada'
In Ontario, output expanded at a robust pace, helped by the fastest rise
in new export work for just over four years
"The manufacturing sector downturn is starting to reverse course in
Canada, with the latest survey indicating a modest rebound in
production volumes and an overall stabilization in export sales. While
lower levels of energy sector capex continued to weigh on manufacturing
performance, exchange rate depreciation has helped boost
competitiveness and offset some of the weakness in domestic demand"
said Cheryl Paradowski, president and chief executive officer, SCMA. "A regional breakdown of the manufacturing PMI indicates particularly
strong output and export sales growth in Ontario, while all regions
except Alberta and BC recorded net job creation. Even in Alberta and
BC, the overall downturn in business conditions was less marked than
April's survey-record low."
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 geographically and by Standard Industrial
Classification (SIC) group, based on industry contribution to Canadian
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
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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 reaches its highest level since January in May (CNW Group/Markit)". Image available at: https://photos.newswire.ca/images/download/20150601_C9478_PHOTO_EN_43475.jpg
For further information:
Royal Bank of Canada
Elyse Lalonde, 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