Nov. manufacturing output grows at fastest pace since 2011: RBC PMI
Output increase buoyed by rise in new order volumes, job creation and subdued input price inflation.
TORONTO – Business conditions in Canada’s manufacturing sector continued to improve strongly in November, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI).
The seasonally adjusted RBC PMI – a composite indicator that provides a single-figure snapshot of the health of the manufacturing sector – registered 55.3 in November, signalling a strong improvement in Canada’s manufacturing business conditions. Although the headline index was down slightly from October’s 55.6, it was consistent with one of the fastest rates of growth for over two years.
A marked rise in new order volumes, partly reflective of new client wins, supported the strongest increase in output since March 2011. Concurrently, firms hired additional staff in November, although the rate of employment growth eased to a four-month low. On the price front, inflationary pressures remained muted with the latest rise in input costs, in particular, weaker than October’s seven-month peak.
“While the US government budget impasse negotiations did not come to a firm resolution, recent reports suggest that the fourth-quarter hit to U.S. growth will be limited following a solid gain in the third quarter,” said Craig Wright, senior vice-president and chief economist, RBC. “A slow and steady increase in US growth will play a big role in setting the stage for a continuation in the recent momentum we have seen in Canadian manufacturing activity over the past few months.”
The headline RBC PMI reflects changes in output, new orders, employment, inventories, prices and supplier delivery times.
Key findings from the November survey include:
- marked rates of output and new order growth;
- rate of job creation eases to four-month low; and
- input price inflation remains subdued.
Incoming new work at Canadian manufacturers continued to rise markedly in November. Firms generally cited greater client demand and new contract wins, including from the United States. Consequently, new export orders rose for the eighth consecutive month.
Firms raised production in light of larger new order requirements. Stocks of finished goods increased in November, reversing a reduction in October, and backlogs of work rose for the third consecutive month.
The quantity of inputs bought by Canadian manufacturing firms rose strongly and at a pace only slightly weaker than October’s 25-month peak. The increase in purchasing activity was partially used to rebuild inventories, with stocks of purchases rising for the third month running. Greater demand for inputs was also a factor behind longer suppliers’ delivery times in November. Lead times have increased in each month since July.
Input prices increased in November, with panellists commonly reporting higher prices for steel and fuel. The rate of inflation eased to a moderate pace that was slower than the series average. Firms partially passed on their higher costs to clients by raising selling prices.
Regional highlights include:
- Business conditions improved across all four Canadian regions. Alberta and BC saw the strongest improvement over the month.
- Alberta and BC posted the fastest rise in new orders.
- Ontario saw no change in exports, but this was an improvement from a reduction one month previously.
A monthly survey, conducted in association with Markit, a leading global financial information services company, and the Supply Chain Management Association (SCMA), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian manufacturing sector.
The report is available at www.rbc.com/newsroom/pmi