Canadian Manufacturing Purchasing Managers Index shows encouraging results

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TORONTO, Ont. — The RBC Canadian Manufacturing Purchasing Managers Index for April has good news for those worried the economic recovery may once again be slowing.

Canadian manufacturing business conditions in April improved to the greatest extent in 2012 so far, according to the Index, a monthly survey, which offers a comprehensive and early indicator of trends in the Canadian manufacturing sector

The headline RBC PMI – a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector – signalled a solid improvement in Canadian manufacturing business conditions in April. At 53.3, up from 52.4 in March, the PMI was the highest in four months, but nonetheless remained below the average for the series.

The RBC PMI found that both output and new orders increased in April, with firms generally citing greater client demand. Notably, new export orders grew solidly and at the fastest pace for a year. Canadian manufacturers hired additional staff in April; however job creation was the slowest in three months. The rate of input price inflation was the strongest since last August.

“Favourable manufacturing conditions have been a prevailing force in Canada so far this year thanks, in part, to strong output and new export order growth in particular which accelerated in April at the fastest pace in a year,” said Craig Wright, senior vice-president and chief economist, RBC. “As the economy south of the border strengthens, we expect the Canadian manufacturing sector will continue to reap the benefits of increasing U.S. demand for key Canadian exports such as autos, machinery and lumber.”

The Index is conducted in association with Markit, a global financial information services company, and the Purchasing Management Association of Canada (PMAC).

“Encouraging signs came from the latest RBC PMI report, with both new orders and output increasing solidly in April. Manufacturers reported a pick up in new export orders, with greater demand from the U.S. particularly highlighted,” said Cheryl Paradowski, President and Chief Executive Officer, PMAC. “The increase in output contributed to higher input purchases and the first accumulation of input inventories since August 2011, which added to suppliers’ delivery delays. Although the RBC PMI signalled the strongest improvement in business conditions so far in 2012, it still remained below the series average in April.”

In addition to the headline RBC PMI, the survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times.

Key findings from the April survey include:

RBC PMI at four-month high, but still below the series trend

Greater client demand supports further increases in both total and export orders

Employment growth the weakest in three months

Firms largely linked improved business conditions to greater client demand and new contract wins in April. Approximately 35 per cent of firms received a larger volume of new orders compared with March, with the rate of growth accelerating to a four-month high. New work intakes from abroad also increased solidly in April, with new export orders from the U.S. particularly mentioned by survey respondents.

Reflective of the increase in new orders, Canadian manufacturers raised production and depleted stocks of finished goods in April. Output has increased in each month since data collection began in October 2010, with the latest rise the strongest since last December, while inventories of post-production goods declined for the tenth month running. Concurrently, backlogs of work were broadly unchanged since March.

The amount of inputs bought by Canadian manufacturing companies increased solidly during the latest survey period. Input inventories also rose, increasing for the first time since August 2011. Suppliers’ delivery times meanwhile lengthened further in April, with the latest deterioration in vendor performance the greatest in seven months.

Employment in Canada’s manufacturing sector rose for the third consecutive month in April. Firms that hired additional staff generally commented on larger production requirements. That said, the rate of job creation eased since March, was slower than the series average, and the weakest in the current sequence of growth.

Input costs rose further in April, with panellists particularly mentioning fuel and raw materials as having increased in price. The rate of input price inflation was marked and the strongest in eight months. Firms passed parts of their greater cost burdens on to clients by raising their selling prices. Output charges rose solidly over the month, in contrast to a slight reduction reported in March.

Regional highlights include:

April data signalled that manufacturing business conditions improved in all four Canadian regions. The strongest monthly improvement was posted in Quebec.

The fastest rate of new order growth was reported by manufacturers based in Quebec, while the slowest expansion was recorded by firms in Alberta & British Columbia.

Job creation was reported in three regions in April, with the only exception being Alberta & British Columbia.

Ontario posted the strongest increase in both input prices and output charges in April.

The report is available at

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