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Orders grow, production picks up the pace in August

The pace of new business picked up for Canadian manufacturers in August according to a new Canadian purchasing managers index report that follows a Statistics Canada’s latest GDP figures showing a contraction in the second quarter.


September 1, 2011
by PLANT STAFF

TORONTO: The pace of new business picked up for Canadian manufacturers in August according to a new Canadian purchasing managers index report that follows a Statistics Canada’s latest GDP figures showing a contraction in the second quarter.

The RBC Canadian Manufacturing Purchasing Managers Index (RBC PMI) rose to 54.9, up from 53.1 in July, its highest reading in four months.

Based on reports from purchasing executives at more than 400 companies, there were strong increases in both output and new orders. Panellists cited greater demand and new client wins, resulting in additional staff deal handle the increased workloads.

They also noted price pressures eased in August, with both input costs and output charges rising at slower rates.

“Today’s report supports the view that the supply chain problems in manufacturing which arose from the natural disasters that hit Japan in March have started to reverse. This augurs well for a rebound in manufacturing activity over the second half of this year,” said Paul Ferley, RBC’s assistant chief economist.

Statistics Canada reported this week the Canadian economy shrank in the second quarter as a number of one-time shocks rippled through the economy, taking their toll on the key exports sector.

Canadian gross domestic product shrank 0.1% in the three months ended June 30, or at an annualized pace of 0.4%. But economists said it was unlikely the country would make a second misstep and slip back into a recession as growth is forecast to return in the second half of the year – albeit modestly.

Finance Minister Jim Flaherty said that despite the weak second-quarter numbers they were “broadly consistent” with expectations in the budget and he expected modest growth in the third and fourth quarters.

Economist David Madani of Capital Economics said the recent turmoil on the stock markets as well as lower consumer confidence and slower than expected household spending were all risk factors for the second half of the year.

“The good news is that business investment remained very strong in the second quarter, increasing by over 15%, following similar growth in previous quarters,” said Madani, who forecast growth to accelerate to an annual pace of 2.5% in the third quarter.

“Favourable commodity prices, respectable profit margins and easing access to credit should continue to spur investment growth in the quarters ahead.”

The monthly purchasing managers survey, conducted in association with Markit, a leading global financial information services company, and the Purchasing Management Association of Canada (PMAC), offers a comprehensive and early indicator of trends in the Canadian manufacturing sector.

Click here for a copy of the report.

With files from Canadian Press