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Faster increases in output, new orders and jobs in July: report

August 4, 2021   Maryam Farag

According to IHS Markit Canada Manufacturing PMI, operating conditions across Canada’s manufacturing sector remained firmly in expansion territory in July.

Quicker increases in output and new orders, underpinned by another relaxation of COVID-19 restrictions, supported a robust rate of growth in July. Meanwhile, backlogs rose at the second-quickest rate in the series history. Anecdotal evidence pointed to staff shortages and delivery delays as the pandemic continued to cause supply chain pressures, although the incidence of delays was the smallest in five months.

Material shortages were again blamed for higher costs with firms often reporting rising metal prices. The strong demand environment allowed a partial pass-through of higher expenses, with output price inflation reaching a near-series high.

Demand improved during the month, and with a rate of new order growth that was fractionally quicker than that in June. Virus-related restrictions eased further across the regions allowing the continued re-opening of businesses. Similarly, improvements in global economic conditions led to higher sales to international markets, mainly the US and China.

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To cater for rising workloads, production rose at a sharp and accelerated pace. Higher staffing and demand levels supported the uptick, according to respondents. Job creation has now been seen in each month since July 2020, with the rate of growth quickening during the month. That said, the latest uptick was not enough to curb a rise in backlogs. In fact, incomplete work rose at the second-quickest rate in the series to date. Difficulties sourcing skilled labour and raw materials were among the reasons mentioned by panellists. As a result, post-production holdings fell sharply.

Input prices rose sharply in July amid higher freight, steel, and aluminium costs. The rate of inflation eased marginally from June, but was still amongst the quickest in the series history. Consequently, firms raised their selling charges, and at the second-quickest rate in the survey history.