Canadian Manufacturing

Weaker expansion in manufacturing sector for September, RBC survey finds

Rates of growth have slowed to weakest since March,second-weakest in two-year survey history



TORONTO—Canada’s manufacturing sector saw its weakest pace of expansion in six months in September, according to RBC’s monthly survey of the industry.

The RBC Canadian Manufacturing Purchasing Managers’ Index (PMI) signalled both output and new orders increased during September, partly reflecting greater client demand.

According to RBC, however, the rates of growth have slowed to their weakest since March and the second-weakest in the two-year survey history.

But analysts at the financial firm are taking a positive approach to the data, finding relative health at home when compared to numbers from abroad.

“All things considered, particularly within the context of the relatively weak global economic and manufacturing data, the fact that Canada’s manufacturing sector continues to expand is noteworthy,” RBC senior vice-president and chief economist Craig Wright said in a statement.

The headline RBC PMI—a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector—registered 52.4 in September, which RBC says is evidence of a modest expansion in Canada’s manufacturing industry.

Incoming new work received by Canadian manufacturers rose further in September, with a number of monitored companies attributing the boost to greater client demand.

The volume of new export orders also increased over the month, albeit only marginally.

Overall, total new orders rose moderately since August, but the rate of growth was the slowest in six months and weaker than the series average.

Manufacturing production rose in response to larger new order requirements.

However, the latest increase in output levels was the second-weakest in two years of data collection.

Backlogs of work and stocks of finished goods, meanwhile, were both broadly unchanged from one month previously, according to survey data.

Employment in Canada’s manufacturing sector increased in September, with approximately 17 per cent of firms hiring additional staff from August, though anecdotal evidence generally linked the increase in employee numbers to greater production requirements.

According to survey results, 14 per cent of companies reduced their workforces over the month, and the rate of job creation slowed to a five-month low.

Input costs rose further in September, with fuel and raw materials such as metals and plastics particularly mentioned as having increased in price.

“While it hasn’t been entirely smooth sailing for Canada’s broader economy in recent months, continued business spending and improving labour market conditions, among other generally positive factors, will help set the stage for GDP growth of 2.1 per cent in 2012,” Wright said.

Regionally, Ontario saw the weakest improvement in manufacturing business conditions during September.

The rate of job creation accelerated slightly in Alberta and British Columbia, according to RBC.

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