IHS Markit: rate of growth maintained in November, but supply constraints persist

Latest PMI data continued to reveal a robust expansion in Canada’s manufacturing sector, as output growth accelerated while new orders rose at a solid pace.

Firms continued to engage in advance ordering to protect against shortages, but transportation bottlenecks led to another marked lengthening in lead times. Consequently, backlogs of work rose at a survey record pace.

Rising demand and higher transportation fares led to a sharp increase in costs. The favourable demand environment allowed firms to partly pass on higher expenses, however.

Manufacturers recorded the fastest rise in production levels for three months, which was linked to increased workloads. The overall rate of expansion was strong, and in line with the average seen for 2021 so far.

Meanwhile, new work expanded solidly, but at a softer pace during November. Survey respondents widely commented on improved demand and higher customer numbers. There were also reports that companies broadened their product offerings. At the same time, greater demand from U.S. and Asian markets supported a tenth monthly uptick in exports.

There were further signs that manufacturing companies struggled to keep up with workloads during the month. Unfinished business increased at a survey-record pace which was largely linked to stretched supply chains and component shortages.

Average lead times from vendors lengthened to the second-greatest extent since the survey began in October 2010. Anecdotal evidence suggested that transportation delays, material scarcity, port congestion and virus-related restrictions had led to worsening 70 vendor performance. In response, manufacturers sought to build their safety stocks during November, with the latest rise in pre- production inventories the joint second steepest in the series history.

Robust demand for raw materials, along with higher transportation, fuel and energy costs led to a marked rate of input cost inflation. Survey respondents commented on difficulties sourcing semiconductor chips and higher prices for steel, rubber, aluminium and electrical components.