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Momentum slows in August but purchasing managers upbeat

A robust expansion in production fuelled by new business, with a jump in job creation.


LONDON, UK — Canadian manufacturers lost a bit of momentum in August when the rate of business conditions improvement slowed. The IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 54.6 compared to 55.5 in July.

But the purchasing executives at 400 industrial firms who provide input for the PMI were “firmly positive” in August thanks to upbeat sales forecasts.

Their optimism is in line with second quarter readings from Statistics Canada, which put the annualized rate of economic expansion at 4.5%. Canadian Manufacturers & Exporters says exports were up 10.6% in the first half of the year with 65,700 jobs added across Canada since February.

The August PMI exceeded the index average and signalled a robust expansion in production fuelled by new business, which contributed to a jump in job creation for the eleventh straight month – the most significant increase since October 2010’s results.

Input price inflation slipped to a ten-month low but remained steep overall, leading to another sharp rise in average selling prices with rising client demand.

New orders also expanded for the eleventh successive month, although at the weakest rate so far this year. Export order growth weakened from the previous month and was only modest.

Manufacturers raised their production at a weaker pace with an additional decline in post- production inventories as firms depleted their stocks to meet client demand.

Meanwhile, demand for raw materials among manufacturers continued to strengthen, but at the weakest pace since May with pre-production inventories stalled after five months of growth.

Higher raw material costs contributed to a further round of input price inflation, albeit the least in 11 months. Some firms passed higher costs on to customers.

Average lead times continued to lengthen as strong demand for inputs caused supply chain bottlenecks.

The IHS Markit Canada Manufacturing Purchasing Managers’ Index is produced with the
Supply Chain Management Association (SCMA), which represents Canadian supply chain management professionals.

IHS Markit is a research firm based in London, UK that produces PMI surveys from more than 30 countries.

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