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Business picks up at a brisk pace for Canadian manufacturers

Purchasing Managers’ Index shows a significant improvement in conditions.


TORONTO — Canadian manufacturers got off to a strong start in January thanks to business conditions improving at the fastest pace in two years, according to the latest Markit Canada Manufacturing Purchasing Managers’ Index (PMI).

International research firm IHS Markit produces the PMI, a survey of purchasing executives from 400 companies, with Canada’s Supply Chain Management Association.

The January PMI registered 53.5, up from 51.8 in December and above the neutral 50.0 threshold for the eleventh consecutive month. But it also represents the strongest upturn in two years, reflecting robust growth of output and new orders, plus a sustained rise in staffing levels.

Around 41% of the survey panel anticipate an increase in production volumes over the next 12 months, compared to just 6% who forecast a reduction.

Higher levels of output have been recorded in each of the past three months, and the latest rise is the strongest since December 2014.

New order volumes were mostly driven by stronger demand from domestic sources, some manufacturers noting rising sales to energy sector clients in particular. The pace of new export orders picked up at a more moderate pace.

With higher levels of incoming work come growing staff numbers. The January survey shows the fasted rate of job creation since last July, although manufacturers still experienced a rise in backlogs – the first in three months. Input buying increased at a solid pace and inventories declined.

Supplier delivery times lengthened the most since November 2014, but were partly attributed to transportation delays following extreme weather.

There was a sharp and accelerated pace of cost inflation linked to higher commodity prices and rising imported raw material costs. Pressures on margins resulted in one of the fastest rates of factory gate price inflation since early-2014.

Growth was strongest (for more than three years) in Alberta & BC, but business conditions deteriorated again in Quebec, partly reflecting weaker export sales. All regions reported a significant deterioration in supplier performance.

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