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Operating conditions improve sharply amid stronger demand conditions: report

September 1, 2021   Maryam Farag

According to IHS Markit, Canadian manufacturers recorded another robust expansion in manufacturing conditions with the PMI at a four-month high in August.

Quicker upticks in output, new orders, exports and purchases underpinned growth and in turn supported optimism. Delivery delays were again, however, a common theme in the latest survey period, with lead times lengthening markedly. As a result, firms sought to protect against future shortages by building pre-production inventories but consequently faced steep cost pressures. Input price inflation strengthened to a fresh new series high, but selling prices rose at a fractionally softer pace.

Production volumes at Canadian manufacturers rose at a sharp and accelerated pace. Around 23 per cent of firms increased production in August compared to July, compared with 11 per cent who reported declines.

Similarly, higher sales to both international and domestic markets resulted in a marked uptick in new orders. Firms mentioned a general improvement in customer demand. Higher sales to US and European markets also drove the increase, according to panellists.

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Higher output requirements and rising backlogs resulted in additions to headcounts in August, bringing the current period of job creation to 14 months. The rate of increase moderated slightly from July but remained higher than the long-run series average. Some firms found it difficult to source skilled replacements for voluntary leavers, however.

Supply chains were once again under intense pressure in August. Global material shortages and port congestions added to lead times which lengthened to the second-greatest extent in the series history. In a bid to protect against future supply shocks, firms added to their pre-production inventories, and at the second-quickest rate on record.