New orders rise at a slower pace
TORONTO, March 3, 2014 /CNW/ - February data signalled that the Canadian
manufacturing sector remained in expansion mode, with output, new
orders and employment all rising during the month. That said, the
latest increase in new work was the slowest since August 2013,
according to the RBC Canadian Manufacturing Purchasing Managers' Index™ (RBC PMI™). 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.
Adjusted for seasonal influences, the headline RBC PMI registered 52.9
during February, up slightly from a nine-month low of 51.7 in January.
The index has now posted above the neutral 50.0 value for eleven
successive months and the latest reading pointed to a solid improvement
in overall business conditions.
"Canada's manufacturing sector grew at a notably stronger pace in
February relative to January," said Craig Wright, senior vice-president
and chief economist, RBC. "As we move through 2014, we'll see a
strengthening in exports relative to imports, with trade contributing
more than it has to Canada's growth over the past decade. This should
encourage a rebound in investment activity, particularly amongst
manufacturers."
The headline RBC PMI reflects changes in output, new orders, employment, inventories, prices
and supplier delivery times.
Key findings from the February survey include:
-
Production levels increased for the tenth successive month
-
Weaker new business growth partly reflected softer export order
expansion
-
Input cost inflation was at its strongest level since May 2011
A stronger overall performance by the Canadian manufacturing sector in
February partly reflected an acceleration of output growth from the five-month low during January. Although new business volumes increased for the eleventh successive month, the latest rise
was the slowest since last August. New orders from abroad increased
only marginally, with February data highlighting the weakest trend in
export sales since March 2013.
Manufacturers indicated a return to jobs growth in February, following a slight reduction in staffing levels during the
previous month. However, the pace of employment growth was only
marginal and a number of firms noted that weaker new business gains had
led to cautious staff hiring policies. Meanwhile, backlogs of work rose only slightly, albeit for the first time in three months.
In line with greater production requirements, manufacturers signalled a
moderate rise in their levels of input buying during February. Despite the relatively subdued trend for purchasing
activity, the latest data signalled a steep deterioration in supplier performance. Average lead-times from vendors lengthened to the greatest degree
since September 2011, which survey respondents widely linked to adverse
weather conditions (especially those receiving deliveries from
suppliers in the U.S.).
February data indicated that manufacturers remained cautious about their
stock levels, largely due to weaker new business growth. As a result,
post-production inventories increased at the slowest pace in the
current four-month period of expansion while stocks of inputs dropped
for the third month running.
Meanwhile, manufacturers signalled a sharp and accelerated pace of input cost inflation during February, which led to a robust rise in factory gate charges. The latest increase in average input prices was the fastest since May
2011. Survey respondents commented on higher underlying raw material
costs, alongside inflationary pressures from exchange rate movements
against the U.S. dollar.
Regional highlights include:
-
Output growth was recorded in all four regions and was again strongest
in Ontario.
-
Only Alberta & British Columbia recorded faster new business gains in February.
-
Quebec registered the strongest rise in new export orders.
-
Alberta & British Columbia remained the best performing region in terms of job creation.
"Solid output growth and a return to net job creation were the main
positive findings in February's survey," said Cheryl Paradowski, president and chief executive officer, SCMA. "However, a much slower rate of new export order growth weighed on the
Canadian manufacturing sector. Meanwhile, there were reports that
recent currency depreciation had helped push up input cost inflation to
its fastest for almost three years."
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 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 services, 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 42 other
countries. For more information, please visit rbc.com.
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more than $104 million to causes worldwide, including donations and
community investments of more than $69 million and $35 million in
sponsorships. Learn more at www.rbc.com/community-sustainability.
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.
About Markit
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 over
3,000 people in 11 countries. For more information, please see www.markit.com.
About PMI
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 markit.com/economics.
The intellectual property rights to the RBC Canadian Manufacturing PMI
provided herein are owned by or licensed to 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 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.
SOURCE Markit
Image with caption: "RBC Canadian Manufacturing PMI™ - Canadian manufacturing sector experienced solid growth in February (CNW Group/Markit)". Image available at: http://photos.newswire.ca/images/download/20140303_C8251_PHOTO_EN_37344.jpg
