Manufacturing output expansion continues in November: IHS-PMI

OTTAWA — An expansion of new orders helped underpin another sharp improvement in business conditions across manufacturing in November, according to the IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI).

The index registered 55.8 for the month, up slightly from 55.5 in October. The index has now posted above the 50.0 no-change threshold in each month since July.

The PMI analysis showed output and purchasing activity added to workforces for the fifth
straight month. But backlogs rose again at manufacturers, signalling capacity pressures.

Sentiment remained positive with firms expecting the passing of COVID-19 in the year ahead.

Output prices increased at the fastest pace since February 2019, as higher raw material and transportation costs were passed onto consumers.

Purchasing managers said output growth at Canadian manufacturers remained strong midway
through the final quarter of 2020. Survey respondents linked rising production volumes to improving domestic demand conditions, and higher unit orders. But demand from export markets rose only fractionally than that seen in the previous period, however.

Travel and border restrictions weighed on the overall level of exports. An uptick in production schedules was supported by additional staff recruitment across the manufacturing sector, which extended the current period of job creation to five successive months.

Despite increased staffing, there were signs that manufacturing companies struggled to keep up with increasing workloads with backlogs rising solidly in November. At the same time, vendor performance deteriorated amid:

• Rate of production growth holds at two-year high
• Supplier delivery times lengthen markedly during November
• Output price inflation quickens to 21-month high

“Latest survey data shows encouraging signs at the Canadian manufacturing sector as it continues to recover from the second quarter downturn,” said Shreeya Patel, economist at IHS Markit. “New orders, output and employment all continue to expand in November.”

He said businesses foresee an improvement in production levels in the year ahead after a sustained
period of growth was recorded in domestic demand.

“That said, supplier delivery times lengthened markedly with material shortages and travel restriction often mentioned. Looking ahead, the increasing number of COVID-19 cases has led to tightening lockdown restriction in major manufacturing regions. With a resurgence in case numbers, and further lockdown measures announced, the sector could face softer growth prospects or a second dip in the coming months.”