TORONTO, Dec. 1, 2015 /CNW/ - Canadian manufacturers experienced a slightly slower downturn in overall business conditions than the survey-record low seen during October. This largely reflected a moderation in production cuts across the manufacturing sector in November with the latest fall in output the least marked for three months.
New business levels nonetheless decreased at a sharper pace than in October, while efforts to reduce staffing numbers and inventories persisted during the latest survey period. A slight rebound in new export sales and softer input price pressures were the main positive developments signalled by manufacturing companies in November.
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 manufacturing sector.
At 48.6 in November, the seasonally adjusted RBC Canadian Manufacturing PMI picked up from a survey-record low of 48.0 during October. That said, the latest reading remained inside contraction territory and lower than the average for 2015 so far (49.5). The main factor boosting the headline index in November was a much slower decline in production volumes than seen during the previous month. Moreover, the latest reduction in output was only marginal and the least marked since August.
"With another reading in contraction territory, the RBC PMI is signalling that Canada's manufacturing sector continues to face headwinds from weak commodity prices, particularly for oil," said Craig Wright, senior vice-president and chief economist, RBC. "Ontario was a regional bright spot, however, with the fastest rise in export sales in nearly four years alongside sustained output growth and job creation. We remain confident that further strengthening in the U.S. economy will augment Canadian exports and set the stage for growing business conditions across the sector in the months ahead."
The headline RBC PMI reflects changes in output, new orders, employment, inventories and supplier delivery times.
Key findings from the November survey included:
- RBC Canadian Manufacturing PMI picked up from October's survey-record low...
- ...helped by a softer decline in production levels
- New business levels fell at a faster pace, despite rebound in export sales
While a number of manufacturers commented on lower production schedules and extended shutdowns in response to falling client demand, there were also reports that signs of an improvement in export sales, especially to U.S. consumer markets, had helped to support output volumes. Panel members also cited a boost from the weaker exchange rate. Reflecting this, latest data pointed to a modest rebound in new work from abroad, with the rate of expansion the fastest since June.
At the same time, total new orders continued to drop across the Canadian manufacturing sector as a whole during November, with the pace of decline the steepest since April. In line with recent trends, survey respondents widely commented on weaker spending across the energy sector and subdued domestic economic conditions. This resulted in another decrease in backlogs of work and some firms restructured their staffing numbers in response to excess capacity. Manufacturing employment has now fallen for five successive months, although the rate of decline remained moderate and partly driven by the non-replacement of voluntary leavers.
Input buying declined again in November, which extended the current period of contraction to five months. Inventory levels were lowered as manufacturers again sought to improve cash flow and streamline stocks. However, delivery times for raw materials lengthened, which survey respondents linked to capacity cuts among suppliers.
November data pointed to a strong rise in input prices, largely driven by higher costs for imported materials. Nonetheless, the rate of cost inflation eased over the month, which manufacturers linked to lower steel prices on world markets and, in some cases, efforts to source local inputs. Meanwhile, output charge inflation slipped to its lowest since January amid widespread reports of squeezed pricing power.
Regional highlights include:
- Ontario was the best performing region, helped by fastest rise in export sales since March 2011
- Sustained output growth and job creation in Ontario contrasted with the national picture in November
- Alberta & British Columbia experienced another steep downturn in manufacturing sector conditions…
- …with staffing levels falling at the fastest pace since April
"Canada's manufacturing sector had another challenging month in November. After a couple of months where overall business sentiment hit the lowest level ever in Canada, there are some positive signs that we are starting to pull out of what has been a pretty steep economic nose dive. Overall production for the month was hit by weak domestic demand and falling capital spending in the oil and gas sector. At the same time, the weaker loonie helped exporters, especially those focused on U.S. consumer markets" said Cheryl Paradowski, president and chief executive officer, SCMA.
"The provincial picture was again very mixed. Business conditions in Alberta and BC are very tough, and are dragging down national figures. The main engine of growth was a strong rebound in Ontario's manufacturing sector during November."
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 direction.
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 protected].
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 79,000 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 38 other countries. For more information, please visit rbc.com.
RBC supports 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 of Ethics.
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 Canadian Manufacturing PMI™ RBC PMI: Manufacturing sector downturn slows in November (CNW Group/Markit)". Image available at: http://photos.newswire.ca/images/download/20151201_C9424_PHOTO_EN_44508.jpg
For further information:
Royal Bank of Canada
Romina Mari, Manager, Corporate Communications, Canada
RBC Capital Markets
Email: [email protected]
Supply Chain Management Association
Cheryl Paradowski, President and CEO
Email: [email protected]
Amanda Cormier, Director, Public Affairs & Communications
Email: [email protected]