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Production volumes close to stagnation: PMI

Purchasing Managers Index shows new orders fall for first time since February.

October 3, 2016   by PLANT STAFF

TORONTO — There was another slowdown in manufacturing growth during September, with production volumes expanding at the weakest pace in seven months, according to a survey of Canadian purchasing executives.

The Markit Canada Manufacturing Purchasing Managers’ Index (PMI), which surveys executives from 400 industrial companies, identified a renewed decline in new business volumes, partly driven by a sharper drop in export sales. The results also show subdued demand contributed to a slight drop in employment with a greater degree of inventory drawdown.

The PMI registered a 50.3, down from 51.1 in August, indicating a marginal improvement in overall business conditions and the slowest pace of recovery since the upturn began in March. Markit, a UK-based research firm, cited lower new order volumes and reduced payroll numbers as the main negative influences on the headline index, alongside the sharpest drop in pre-production inventories since the start of 2016.

Here are some highlights:

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• Production showed only a marginal increase, and the rate of expansion continued to soften from the 11-month peak recorded in May. Lower levels of incoming new work and streamlining inventories slowed output growth at respondents’ plants.

• Manufacturers noted a fractional drop in new work for the first time since February. Anecdotal evidence cited subdued client demand and lower spending on investment goods.

• Reduced levels of new business from abroad were recorded for the third month in a row, and the rate of contraction was one of the fastest seen since early-2015.

• Signs of a slowdown in customer spending resulted in more cautious inventory policies. Stocks of finished goods were depleted for the sixth consecutive month and the decline in pre-production inventories was the sharpest recorded since the start of the year.

• Lower staffing levels ended a six-month period of sustained jobs growth. Respondents commented on the non-replacement of voluntary leavers, contributing to a further rise in unfinished work. The rate of backlog accumulation was the steepest since October 2014.

• Input buying decreased for the third successive month in September, but this did not prevent a further marked deterioration of vendor performance.

Markit said the latest survey data indicated that supplier lead-times lengthened to the greatest degree since June, which manufacturers linked to low stocks and shipping delays.

Meanwhile, input cost inflation was the slowest recorded so far this year. Reduced cost pressures allowed for a return to falling factory gate prices and, although only marginal, the latest drop in output charges was the fastest since December 2015.


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