IHS Markit Canada Manufacturing PMI®

Production growth eases to 22-month low in October

Key findings:

  • Weakest rises in output and new work for almost two years
  • Robust job creation continues
  • Sharp rise in input costs

LONDON–(BUSINESS WIRE)–Canadian manufacturers reported a sustained upturn in overall business
conditions in October, but the rate of improvement slowed for the fourth
month running. This was highlighted by a fall in the seasonally adjusted
IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) to
53.9, from 54.8 in September. The latest reading signalled the weakest
improvement in manufacturing conditions since January 2017. Softer rates
of output and new business growth were the main factors weighing on the
headline index in October.

Production volumes expanded at the slowest pace since December 2016.
Survey respondents cited subdued demand from both domestic and export
markets. The latest overall upturn in new work was the slowest for just
under two years.

In contrast to the weaker trend reported for new business growth, latest
data revealed another robust increase in manufacturing payroll numbers.
Higher staffing levels were attributed to long-term business expansion
plans and associated efforts to boost operating capacity.

Intense supply chain pressures continued in October, as signalled by
another sharp lengthening of lead times for the delivery of materials
from vendors. Anecdotal evidence pointed to transport shortages across
North America and shipping delays at ports following typhoons in Asia.

Low stocks and longer delivery times among suppliers encouraged raw
materials inventory building across the manufacturing sector during
October. Pre-production stocks have increased in each of the past 12
months, although the latest rise was only marginal. Stocks of finished
goods were depleted again, which some firms linked to a more cautious
outlook for client demand.

October data pointed to another sharp increase in average cost burdens
at manufacturing companies. Survey respondents commented that steel
tariffs and rising transportation costs had resulted in higher input
prices.

Meanwhile, factory gate charges also increased at a strong pace in
October, with the rate of inflation accelerating slightly since the
previous month.

Looking ahead, manufacturers are optimistic overall that their
production volumes will rise in the next 12 months. However, the degree
of positive sentiment continued to moderate from the recent peak seen in
April.

The latest reading signalled the weakest level of positive sentiment
since November 2016. Some firms noted that heightened economic
uncertainty, particularly in relation to global trade, had weighed on
confidence in October.

Christian Buhagiar, President and CEO at SCMA, said:

“October data suggest that manufacturing production growth continued
to ease from the elevated rates seen over the summer. More subdued
demand in both domestic and export markets contributed to the weakest
rise in new order volumes since November 2016. At the same time, input
cost inflation remained sharp and delivery times for materials
lengthened amid stretched international supply chains.

“Regional data indicated that rising spending across the energy
sector has helped to moderate the slowdown in manufacturing growth, with
firms in Alberta & British Columbia reporting the steepest rises in
output and employment.

“Quebec appears to have felt the soft patch for global trade most
keenly, with manufacturers reporting that new export work fell for the
second month running in October.”

Methodology

The IHS Markit Canada Manufacturing PMI® is compiled by IHS
Markit from responses to questionnaires sent to purchasing managers in a
panel of around 400 manufacturers. The panel is stratified by detailed
sector and company workforce size, based on contributions to GDP.

Survey responses are collected in the second half of each month and
indicate the direction of change compared to the previous month. A
diffusion index is calculated for each survey variable. The index is the
sum of the percentage of ‘higher’ responses and half the percentage of
‘unchanged’ responses. The indices vary between 0 and 100, with a
reading above 50 indicating an overall increase compared to the previous
month, and below 50 an overall decrease. The indices are then seasonally
adjusted.

The headline figure is the Purchasing Managers’ Index® (PMI).
The PMI is a weighted average of the following five indices: New Orders
(30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%)
and Stocks of Purchases (10%). For the PMI calculation the Suppliers’
Delivery Times Index is inverted so that it moves in a comparable
direction to the other indices.

Underlying survey data are not revised after publication, but seasonal
adjustment factors may be revised from time to time as appropriate which
will affect the seasonally adjusted data series.

For further information on the PMI survey methodology, please contact economics@ihsmarkit.com.

About IHS Markit

IHS Markit (Nasdaq: INFO) is a world leader in critical information,
analytics and solutions for the major industries and markets that drive
economies worldwide. The company delivers next-generation information,
analytics and solutions to customers in business, finance and
government, improving their operational efficiency and providing deep
insights that lead to well-informed, confident decisions. IHS Markit has
more than 50,000 business and government customers, including 80 percent
of the Fortune Global 500 and the world’s leading financial
institutions. IHS Markit is a registered trademark of IHS Markit Ltd.
and/or its affiliates. All other company and product names may be
trademarks of their respective owners © 2018 IHS Markit Ltd. All rights
reserved.

About SCMA

The Supply Chain Management Association (SCMA) is Canada’s largest
association for supply chain management professionals. We represent
7,500 members as well as the wider profession working in roles that
cover sourcing, procurement, logistics, inventory, and contract
management. SCMA sets the standards for excellence and ethics, and is
the principal source of professional development and accreditation in
supply chain management in Canada. www.scma.com.

About PMI

Purchasing Managers’ Index® (PMI®) surveys are now
available for over 40 countries and also for key regions including the
eurozone. They are the most closely watched business surveys in the
world, favoured by central banks, financial markets and business
decision makers for their ability to provide up-to-date, accurate and
often unique monthly indicators of economic trends. To learn more go to ihsmarkit.com/products/pmi.html.

Disclaimer

The intellectual property rights to the data provided herein are owned
by or licensed to IHS Markit. Any unauthorised use, including but not
limited to copying, distributing, transmitting or otherwise of any data
appearing is not permitted without IHS Markit’s prior consent. IHS
Markit shall not have any liability, duty or obligation for or relating
to the content or information (“data”) contained herein, any errors,
inaccuracies, omissions or delays in the data, or for any actions taken
in reliance thereon. In no event shall IHS Markit be liable for any
special, incidental, or consequential damages, arising out of the use of
the data. Purchasing Managers’ Index® and PMI® are
either registered trade marks of Markit Economics Limited or licensed to
Markit Economics Limited. IHS Markit is a registered trademark of IHS
Markit Ltd. and/or its affiliates.

Contacts

IHS Markit
Tim Moore, +44-1491-461-067
Associate
Director
tim.moore@ihsmarkit.com
or
Joanna
Vickers, +44-207-260-2234
Corporate Communications
joanna.vickers@ihsmarkit.com
or
SCMA
Lynne
Coles 416-542-3860
lcoles@scma.com

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