Manufacturing sector sinks to four-month low in August, survey says

TORONTO—Manufacturers faced a renewed downturn in August, though the deterioration in business conditions was only marginal, according to the latest Royal Bank of Canada Purchasing Managers’ Index survey.

“August data indicated a decline in output levels for the first time in four months, while payroll numbers decreased at the joint-fastest rate since the survey began in October 2010,” RBC PMI said.

While output declined, the survey found the weaker exchange rate contributed to a modest rise in new export work. The weak loonie also caused manufacturers to report a marked increase in imported raw material costs, however, which contributed to the fastest rate of price inflation in just over a year and placed additional pressure on operating margins.

“This month’s data suggests that several sectors within the Canadian manufacturing industry continue to face headwinds, with the PMI registering at a four month low,” Craig Wright, senior vice-president and chief economist at RBC, said. “We remain confident that, as the U.S. economy continues to strengthen and the Canadian dollar remains competitive, there will be an uptick in exports for Canadian manufacturers, offsetting some of the momentum lost in August.”

Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI registered 49.4 in August, down from 50.8 in July and the lowest reading since May. The headline index dipped below the neutral 50.0 mark for the first time in three months.

The survey also noted Ontario and Quebec both registered overall sector growth, while B.C. and Alberta recorded sharp declines in business conditions.