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Manufacturers end 2016 on a high note: PMI

Led by stronger new order growth, improving demand conditions.

January 4, 2017   by PLANT STAFF

TORONTO — Canadian manufacturers ended 2016 with the strongest production growth since July and the quickest upturn in incoming new work in two years.

The December Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered a 51.8, up from November’s 51.5, signalling a modest improvement in business conditions. This improvement was tempered by higher input costs for the third consecutive month, driven by higher prices for imported materials, especially metals. Pressure on operating margins resulted in the steepest rise in factory gate prices since May 2014.

The PMI report, by UK research firm IHS Markit and Canada’s Supply Chain Management Association (SCMA), is based on data compiled from purchasing managers at more than 400 manufacturing companies.

Survey respondents linked output growth to improving demand conditions, citing greater domestic spending in the energy and automotive sectors.

Export sales were only marginally higher but showed a rebound from declines in the third quarter.

Hiring was up for the third consecutive month. Purchasing managers reported recruitment was driven by rising production schedules, which contributed to a slight reduction in work backlogs at the end of the year.

Post-production inventories have continued to decrease each month since April. Some firms noted stronger than expected sales growth helped to reduce warehouse stocks of finished goods. Pre-production inventories were also depleted, but marginally. Longer delivery times from suppliers were attributed to rail freight delays.

Rising input costs, at their highest level in two years, were linked to exchange rate factors and rising commodity prices. The rise in output charges was the steepest since May 2014.

Regionally, Alberta and BC recorded the fastest rise in new orders since November 2013, while Quebec manufacturers reported a sustained decline in output from weaker export sales.

For the first time since February 2015, all regions posted a rise in factory gate prices.


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