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Manufacturing gains momentum in August: survey

RBC PMI indicates a “robust improvement” in operating conditions.

September 2, 2014   by PLANT STAFF

Stronger domestic spending patterns boost  order books.  Photo: Thinkstock

Stronger domestic spending patterns boost order books.
Photo: Thinkstock

TORONTO — Canadian manufacturing has picked up the pace showing the fastest improvement in businesses conditions since November 2013, according to the RBC Canadian Manufacturing Purchasing Managers’ Index.

The RBC PMI, a monthly survey, conducted in association with Markit, a global financial information services company, and the Supply Chain Management Association (SCMA), is an early indicator of trends in the manufacturing sector.

Adjusted for seasonal influences, it registered 54.8 in August, up from 54.3 in July and comfortably above the 50.0 neutral baseline. It’s the highest reading for nine months and RBC says it indicates a “robust improvement” in operating conditions.

Output and new business growth both accelerated during August, while job creation hit its strongest level for 11 months. And cost pressures subsided to their weakest point so far this year, which RBC says contributed to a further moderation in factory gate price inflation during the latest survey period.

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“The momentum in Canada’s manufacturing sector is clearly being sustained with the index registering the ninth consecutive month of improvement,” said Craig Wright, RBC’s senior vice-president and chief economist. “We expect Canadian manufacturers will continue to directly benefit from the strengthening US economy, which has made and will continue to make positive strides.”

Key findings include the following:

• Anecdotal evidence cited stronger domestic spending patterns with a boost to order books from higher export sales. August data pointed to the most marked increase in new work from abroad since March, with a number of manufacturers attributing the rise to greater spending by clients in the US.

• A sustained improvement in new business inflows continued to encourage job creation across the manufacturing sector. Employment numbers rose for the seventh month in a row, and at the strongest rate since September 2013. In turn, increased staffing levels helped slow the pace of backlog accumulation at manufacturing companies in August.

• Greater production schedules resulted in a robust expansion of input buying. Pre-production stocks were accumulated for the first time in four months, while finished goods inventories were depleted at a marginal pace. Strong demand for raw materials contributed to a further lengthening of suppliers’ delivery times during the month.

• Average input prices increasing at the slowest pace since December 2013. Reduced cost pressures in turn contributed to the weakest rise in factory gate charges for nine months.

• Alberta and BC recorded the sharpest improvement in business conditions.

• Manufacturing employment numbers continued to increase in all four regions

• New export order gains were strongest in Alberta and BC, followed by Ontario.
Input cost inflation eased in all four regions during August

The report is based on data compiled from monthly replies to questionnaires sent to purchasing executives from more than 400 industrial companies.

Click here to download the report. www.rbc.com/newsroom/pmi.


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