August another good month for manufacturers: purchasing managers

Canadian manufacturing had another good month in August as it extended its recovery, according to the IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI).

The index registered 55.1 in August, up from 52.9 in July, showing the sharpest improvement in business conditions since August 2018.

“Rising workloads, and signs of capacity pressures emerging were good news for jobs. Employment increased at the fastest rate since the start of 2019,” said Shreeya Patel, economist at IHS Markit. “That said, it was not all positive in August, delivery times lengthened at another marked rate amid ongoing COVID-19 disruption, while there were signs of building inflationary pressures.”

New orders and output both showed solid growth, says the UK-based research firm IHS Markit. Employment also grew as a result of demand for staff amid signs of emerging capacity pressures as input price inflation accelerated at its fastest pace since January 2019.

Manufacturing production showed the fastest growth in two years. Firms linked improved output with recovering market conditions following the COVID-19 pandemic.

Foreign demand improved, ending five-months of falling new export orders. IHS Markit notes antecdotal evidence pointed to growing client demand as the main driver of new order growth.

Backlogs increased for the first time since February 2019. Canadian purchasing managers linked the rise in unfinished work to growing demand and insufficient capacity for completing outstanding business.

Intense supply chain pressures continued in August with further lengthening of delivery times for purchased items. Panellists noted transportation issues as a result of COVID-19 restrictions.

Despite two consecutive months of rising new orders, market uncertainty continued to weigh on stocks of purchases, although the rate of contraction was only modest.

Stocks of finished goods were also markedly depleted. Capacity pressures reportedly forced firms to fulfil orders through the use of inventories.

Input cost inflation accelerated to its fastest for 19 months. Higher purchasing prices were attributed to increased raw material costs.

Manufacturers passed on greater cost burdens to clients through higher factory gate charges. The solid rise in selling prices was the third in the past four months, and the fastest since April 2019.

Looking ahead, business sentiment remained positive, as firms continue to foresee a rise in output over the coming year. But a possible continuation of the pandemic weighed slightly on confidence as the degree of positive sentiment was below the series average in August.

The survey involving purchasing executives from 400 manufacturers was conducted between August 12 and 24.