TORONTO, April 2, 2013 /CNW/ - The March RBC Canadian Manufacturing Purchasing Managers' Index™ (RBC PMI™) signalled the first deterioration in manufacturing business conditions
since data collection began in October 2010, with monthly declines
reported for both output and new orders. A monthly survey, conducted in
association with Markit, a leading global financial information
services company, and the Purchasing Management Association of Canada
(PMAC), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian
manufacturing sector.
The headline RBC PMI - a composite indicator designed to provide a single-figure snapshot of
the health of the manufacturing sector - fell below the 50.0 no-change
mark that separates growth from contraction in March. This was the
first sub-50 reading in the two-and-a-half year survey history. At
49.3, down from 51.7 in February, the RBC PMI was consistent with a
marginal rate of contraction in March.
The RBC PMI found that both the levels of output and new orders were lower in March
compared with one month previously. A number of firms linked this to
weak client demand. The reduced workloads also contributed to a slower
rate of job creation. Meanwhile, on the price front, the rate of input
cost inflation was strong and faster than in February, but remained
slower than the series average.
"The deterioration in the Canadian manufacturing measure is surprising
in the face of improving growth in both the U.S. and various emerging
economies. However, uncertainty about resolving fiscal imbalances in
the U.S. - with sequestration going ahead March 1 - and in the
Euro-area may have weighed on sentiment," said Craig Wright, senior vice-president and chief economist, RBC. "This weak spot should
be short-lived, however, as we expect that global demand for Canadian
exports will recover, providing a welcome boost for domestic
manufacturers."
The headline RBC PMI reflects changes in output, new orders, employment, inventories, prices
and supplier delivery times.
Key findings from the March survey include:
-
RBC PMI falls below the 50.0 no-change mark that separates growth from
contraction;
-
both output and new orders fall modestly in March; and
-
employment growth slows.
Canadian manufacturers received a lower volume of new orders in March. Firms generally linked the reduction to weak client demand,
both at home and abroad, with new export work also having fallen since February. Although moderate, the rate of
decline in total new orders was the sharpest in the 30-month series
history.
Reflective of lower new work intakes, manufacturing firms reduced their output in the latest survey period. Production has fallen in three out of the
past five months, with the latest reduction moderate. Concurrently, stocks of finished goods were depleted, albeit only marginally, and backlogs of work fell further and at a faster rate than one month previously.
Following no change in purchasing volumes in February, the quantity of inputs bought by manufacturers fell in March. However, the rate of decline was only
slight. Input inventories, meanwhile, fell for the fifth successive month, partly reflecting
leaner stock holding requirements.
Suppliers' delivery times lengthened further in March. Anecdotal evidence suggested that vendors
were working with lower inventories, with some suppliers also
experiencing transportation problems. Overall, the increase in lead
times was modest, but to a lesser extent than in February.
Manufacturing employment in Canada continued to increase in March. However, the rate of growth
eased since hitting a four-month high in February. Approximately 14 per
cent of firms hired additional staff in the latest survey period, while
10 per cent reduced their workforces.
Input costs faced by manufacturers rose further in March, with higher
raw material prices and unfavourable exchange rates contributing to the
latest increase. Overall, the rate of input price inflation was strong and faster than in February. Meanwhile, output charges also increased over the month, with the latest rise the greatest for
almost a year.
Regional highlights include:
-
Three regions saw a deterioration in manufacturing business conditions
in March. The rates of contraction were moderate in both Alberta and British Columbia and Ontario, but marginal in Quebec.
-
Production fell at the sharpest rate in Alberta and British Columbia.
-
The strongest rate of contraction in new orders was recorded in Ontario.
-
Job losses were reported in Alberta and British Columbia, but employment growth was recorded elsewhere.
"The Canadian manufacturing sector took a turn for the worse in March,
seeing a deterioration in overall operating conditions for the first
time in the survey's two-and-a-half year history," said Cheryl Paradowski, president and chief executive officer, PMAC. "Highlighting weak demand both domestically and in key export markets,
manufacturers reported month-over-month declines in output and new
orders in March, and they responded by scaling back hiring."
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
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 economics@markit.com.
About RBC
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate
under the master brand name RBC. We are Canada's largest bank as
measured by assets and market capitalization, and are among 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 services, insurance,
corporate and investment banking and investor services and wholesale
banking on a global basis. We employ approximately 80,000 full- and
part-time employees who serve more than 15 million personal, business,
public sector and institutional clients through offices in Canada, the
U.S. and 49 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 2012, we contributed
more than $95 million to causes worldwide, including donations and
community investments of more than $64 million and $31 million in
sponsorships.
About Purchasing Management Association of Canada
The Purchasing Management Association of Canada (PMAC) is the leading,
and the largest, association in Canada for supply chain management
professionals. With 7,000 members working across private and public
sectors, PMAC is the principal source of supply chain training,
education and professional development in the country, requiring all
members to adhere to a Code of Ethics. Through its 10 Provincial and
Territorial Institutes, PMAC grants the SCMP (Supply Chain Management
Professional) designation, the highest achievement in the field and the
mark of strategic leadership. For more information please see www.pmac.ca.
About Markit
Markit is a leading, global financial information services company with
over 2,800 employees. The company provides independent data, valuations
and trade processing across all asset classes in order to enhance
transparency, reduce risk and improve operational efficiency. Its
client base includes the most significant institutional participants in
the financial marketplace. For more information, see www.markit.com.
About PMIs
Purchasing Managers' Index™ (PMI™) surveys are now available for 32 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 www.markit.com/economics.
The intellectual property rights to the RBC Canadian Manufacturing PMI
provided herein is owned by Markit Economics Limited. 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 trade marks of Markit Economics Limited, RBC uses the above marks
under licence. Markit and the Markit logo are registered trade marks of
Markit Group Limited.
Image with caption: "RBC PMI: Canada's manufacturing conditions deteriorated in March for first time in survey history (CNW Group/RBC)". Image available at: http://photos.newswire.ca/images/download/20130402_C9204_PHOTO_EN_24914.jpg
SOURCE: RBC
