IHS Markit announces rise in manufacturing growth in February

An expansion in new orders helped improve operating conditions across the Canadian manufacturing sector in February.

Improving demand and a rise in backlogs encouraged firms to add to workforces, while sustained growth in output led to an increase in purchasing activity.

The latest survey data continued to reveal supply chain pressures, with delivery times lengthening. Firms mentioned that restrictions, implemented to curb the spread of COVID-19, have led to material shortages and transportation delays. As a result, manufactures incurred higher costs through supplier surcharges.

The headline seasonally-adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 54.8 in February, up from 54.4 in January.

A boost to domestic demand underpinned another increase in new orders. That said, foreign demand for Canadian manufactured goods rose fractionally at the start of the year, as pandemic restrictions continued to hinder exports.

“Latest PMI data highlights another solid improvement in the overall health and resilience of Canada’s manufacturing sector,” said Shreeya Patel, Economist, IHS Markit. “An improving domestic demand picture, greater purchasing activity and a sustained period of employment suggests firms expect greater output in the months ahead.”

Output volumes rose in the latest survey period, but the rate of expansion eased to the softest in the current eight-month sequence of growth. Production schedules were supported by higher new order volumes, although pandemic restrictions weighed slightly on output, according to panellists.

“That said, COVID-19 continues to pose its threats with severe transportation bottlenecks impacting the supply of inputs,” said Patel. “As a result, firms faced sharper cost pressures which were consequently passed on to customers.”