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IHS Markit: “Robust growth in manufacturing production sustained in April”

May 18, 2021   Maryam Farag

April data signalled an overall expansion in operating conditions at the Canadian manufacturing sector, with the latest result extending the period of growth to ten consecutive months.

According to HIS Markit, despite a surge in COVID-19 cases and a series of tightening restrictions, output and new orders rose sharply. Firms responded to the sustained increase in demand by adding to their workforces, however, capacity pressures remained evident with backlogs rising markedly.

“Latest PMI data revealed a confident start to Q2 with a tenth successive monthly expansion recorded in the Canadian manufacturing sector. Despite moderating form March’s near-survey peaks, output and new order growth were robust, while rising backlogs supported additions to headcounts in April. Firms also added to their stockpiles, suggesting greater production in the coming months,” said Shreeya Patel, Economist, IHS Markit.

Meanwhile, port congestion and pandemic restrictions led to another lengthening in supplier delivery times. To guard against future delays firms added to their input stocks at a near-record pace.

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Turing to prices, higher raw material costs and shortages in the supply of inputs added to costs burdens. Firms consequently raised their selling charges, with the rate of output price inflation the sharpest in the ten-and-a-half-year history of the survey.

Canadian manufactures recorded another upturn in their production volumes. Survey respondents commented on supportive demand conditions and greater willingness to spend among clients, particularly those in the construction sector.

New orders rose sharply, albeit at a slightly softer pace than that seen in the previous survey period. Panellists widely commented on greater demand from both domestic and foreign markets (mainly the U.S.).

“Although data highlighted a positive overall demand picture, it continued to reveal strong concerns over future supply. Anecdotal evidence continued to link COVID-19 to severe delivery delays and the limited availability of raw materials. As a result, firms rushed to add to their pre-production stock levels, often paying highly inflated prices for inputs.” said Patel.