Manufacturing business conditions improved in September: RBC
PMI survey indicates higher levels of output, new orders and employment across the sector.
But, the strength of an upturn has moderated, the bank says, thanks in part to stagnation in new export business.
At 53.5 in September, the seasonally adjusted PMI eased from the nine-month high registered during August (54.8). The latest reading was the lowest since June, but remained well above the neutral 50 value and, overall, signalled a solid improvement in business conditions.
The third quarter average for the headline index (54.2) was the highest it has been since Q4 2013.
“As we progress into the final months of 2014, we expect a further strengthening in the US economy will augment Canadian exports and set the stage for solid manufacturing business conditions overall,” said Craig Wright, senior vice-president and chief economist at RBC.
The headline PMI reflects changes in output, new orders, employment, inventories and supplier delivery times.
Key findings from the survey include:
- A slowdown in both output and new order growths
- New export work stagnated
- The solid pace of job creation was maintained
Survey respondents suggested that softer increases in production reflected a slowdown in new business gains. The latest rise in incoming new work was the weakest since May, reflecting a stagnation of new export orders in September, ending a 17-month period of expansion.
Anecdotal evidence suggested that increased demand from clients in the US had been offset by subdued business conditions in other markets, especially in Europe.
A solid rate of job creation was maintained in September, with employment growth easing only slightly from August’s 11-month high. Increased staffing levels were attributed to rising volumes of new work in recent months and corresponding investments in additional capacity. Backlogs increased for the eighth month running, albeit at a marginal pace.
Manufacturers pointed to a further robust rise in their average cost burdens, which was generally attributed to greater raw material prices and transportation costs. Although the rate of cost inflation accelerated since August, the latest rise was still much weaker than those seen in the first half of 2014.
Meanwhile, factory gate price inflation eased for the fourth month running to only a marginal pace.