TORONTO, Sept. 1, 2015 /CNW/ - The latest RBC PMI survey pointed to a renewed downturn in the manufacturing
sector, though the overall deterioration in business conditions was
only marginal. August data indicated a decline in output levels for the
first time in four months, while payroll numbers decreased at the
joint-fastest rate since the survey began in October 2010. Meanwhile,
the weaker exchange rate contributed to a modest rise in new export
work. However, manufacturers reported a marked increase in imported raw
material costs, which contributed to the fastest rate of price
inflation in just over a year and placed additional pressure on
operating margins.
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 RBC Canadian Manufacturing PMI registered 49.4 in August, down from 50.8 in July and the lowest
reading since May. Moreover, the headline index was below the neutral
50.0 mark for the first time in three months.
"This month's data suggests that several sectors within the Canadian
manufacturing industry continue to face headwinds, with the PMI
registering at a four month low," said Craig Wright, senior vice-president and chief economist, RBC. "We remain confident that, as the U.S. economy continues to strengthen
and the Canadian dollar remains competitive, there will be an uptick in
exports for Canadian manufacturers, offsetting some of the momentum
lost in August."
The headline RBC PMI reflects changes in output, new orders, employment, inventories and
supplier delivery times.
Key findings from the August survey included:
-
Business conditions deteriorated for the first time since May
-
Output and employment both decreased in August
-
Strongest rate of input cost inflation since July 2014
Canadian manufacturers signaled a marginal reduction in output levels at
their plants in August, which ended a three-month period of expansion.
Lower production volumes were linked to subdued demand patterns and
efforts to reduce inventories in August. Reflecting this, the latest
survey pointed to the fastest decline in stocks of finished goods since
May. A number of manufacturers noted that concerns regarding the global
economic outlook and falling levels of work-in-hand had contributed to
inventory reduction policies at their plants.
New business volumes continued to rise in August, supported by another
modest upturn in export sales. That said, the latest improvement in
overall new order levels was only marginal and the weakest since the
upturn began in June. Anecdotal evidence suggested that sharp declines
in capital spending among energy sector clients had dampened demand
during August, especially for manufacturers of investment goods.
Ongoing pressures on operating margins, alongside expectations of
subdued client spending patterns, contributed to a decline in
manufacturing employment for the seventh time in the past eight months.
Survey respondents mainly noted that payroll numbers had been lowered
through the non-replacement of voluntary employee departures.
Manufacturers also lowered their purchasing activity in August,
reflecting reduced production requirements and efforts to rein in
stocks of inputs. Latest data indicated a decline in pre-production
inventories for the ninth successive month, with the rate of
contraction the fastest since May.
Average cost burdens increased across the manufacturing sector in
August, which extended the current period of rising input prices to 37
months. Moreover, the rate of cost inflation picked up to its fastest
since July 2014. However, factory gate charges rose only moderately and
the pace of inflation eased from July's five-month high, with pressure
on margins linked to intense competition for new work.
Regional highlights include:
-
Alberta and British Columbia recorded a sharp and accelerated downturn
in business conditions…
-
…while Ontario and Quebec continued to register overall manufacturing
sector growth
-
Manufacturing job cuts were most prevalent in Alberta and British
Columbia
-
All regions recorded strong input cost inflation in August
"Canada's manufacturing sector continues to face growth headwinds from
heightened global economic uncertainty and sharp falls in energy sector
capex plans" said Cheryl Paradowski, president and chief executive officer, SCMA. "Overall manufacturing output fell for the first time in four months,
with softer demand for investment goods appearing to offset a gradual
export-led recovery in consumer goods production. The inventory cycle
acted as an additional drag on business conditions in August, as
manufacturers opted to fulfill orders from existing stocks and cut back
on their own input buying in response to the uncertain demand
outlook."
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 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, 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.
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
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.
About PMI
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.
SOURCE Markit
Image with caption: "RBC Canadian Manufacturing PMI(TM) - RBC PMI: manufacturing sector hits four-month low in August (CNW Group/Markit)". Image available at: http://photos.newswire.ca/images/download/20150901_C9623_PHOTO_EN_44178.jpg
