RBC’s manufacturing PMI takes a tumble
January purchasing managers' index drops to its lowest level in nearly two years.
TORONTO — There was a sharp slowdown in the Canadian manufacturing sector in January, its weakest pace since April 2013, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI).
The monthly survey, conducted in association with Markit, a leading global financial information services company, and the Supply Chain Management Association (SCMA), dropped to 51.0 from 53.9 in December, showing just a marginal improvement in conditions at the beginning of the year.
“The latest data indicates that Canada’s manufacturers started the year with concerns around uncertainty about global growth prospects, financial market volatility and a sharp drop in oil prices,” said Craig Wright, RBC’s senior vice-president and chief economist.
RBC expects an eventual recovery in oil prices in conjunction with a strong US economy and a more competitive currency.
“These factors will support economic growth similar to the 2.5% rate achieved last year and the manufacturing sector offsetting weakness in the energy sector,” said Wright.
Here are the highlights:
• Output and new business growth both eased sharply.
• Manufacturing employment fell for the first time in 12 months.
• Input cost inflation dropped to its lowest since September 2013, despite a weaker exchange rate.
RBC reports manufacturing production growth has moderated for two months, with the latest increase in output volumes being the slowest since May. Meanwhile, new business volumes rose at the least marked rate since April 2013.
Anecdotal evidence from survey respondents, especially investment goods producers, suggested that softer demand from clients in the oil and gas sector had weighed on overall new order gains during the month with relatively subdued export trends continuing during the latest survey period.
New orders from abroad increased fractionally and at the weakest pace for four months, although some firms noted a boost to export sales from improving US economic conditions, similar to responses in previous surveys.
Manufacturers cited a slight reduction in payroll numbers, which ended an 11-month period of sustained job creation across the sector. Respondents blamed an uncertain business outlook and a lack of pressure on operating capacity had weighed on staff recruitment at the start of the year; and the latest data pointed to the sharpest fall in work backlogs since March 2013.
Stocks of finished goods and pre-production inventories both declined at faster rates than in December and input buying among firms increased at the slowest pace since May 2014.
Input cost inflation moderated for the third time in the past four months during January. Although the lowest since September 2013, there were widespread reports that the weakening exchange rate had limited the decline in cost inflation. Factory gate charges meanwhile increased only slightly at the start of 2015.
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