RBC PMI falls to nine-month low, signalling modest growth in manufacturing

TORONTO—Canada’s manufacturing sector grew only modestly in October, with the rate of expansion the weakest since January, according to the latest RBC report.

RBC’s monthly Canadian Manufacturing Purchasing Managers’ Index (PMI) pointed to only modest increases in both output and new orders during October.

In particular, the rate of total new order growth slowed over the month, posting the weakest expansion since January, despite a stronger rise in new export orders.

Meanwhile, input prices continued to increase solidly, but the rate of inflation nonetheless remained weaker than the series average.

“Canadian manufacturing continued to weaken in October though the PMI measure is still indicative of growth in the sector, which is in contrast to flat to declining activity in most other countries,” RBC senior vice-president and chief economist Craig Wright said in a statement.

“This weakening may in part be related to continuing uncertainty around how fiscal imbalances in the U.S. and the euro area will be resolved. Greater strength in the Canadian manufacturing sector may hinge on some of this uncertainty easing as policy measures outside of Canada are implemented.”

The headline PMI—a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector—posted 51.4 in October, and was at a level indicative of only a modest expansion in Canada’s manufacturing sector.

Moreover, having fallen from 52.4 in September, the rate of growth signalled was the weakest for nine months.

The volume of new orders received by Canadian manufacturers increased at the weakest pace in nine months in October, according to RBC.

Although greater client demand, particularly from key export markets such as the U.S. and Asia, contributed to the rise in total new orders, the rate of growth was only modest overall.

Manufacturing production also increased at a weaker pace in the latest survey period.

Output rose only modestly over the month, with the rate of increase at a nine-month low.

Firms, meanwhile, accumulated stocks of finished goods for the first time since June 2011, and reduced the level of outstanding business at the fastest pace since January.

Employment in Canada’s manufacturing sector continued to increase in October, with about 20 per cent of surveyed firms hiring additional staff since September.

Greater workloads were often cited by companies as the main factor behind the latest rise in employee numbers, however, the rate of job creation was modest overall and the slowest for six months.

The quantity of inputs bought by monitored companies increased further in the latest survey period, with some of the rise in purchasing volumes being used to build stocks.

Input inventories have grown for seven consecutive months, although the latest expansion was weaker than that registered one month previously.

Concurrently, suppliers’ delivery times lengthened again in October.

Anecdotal evidence suggested that some vendors had capacity issues in the month.

The latest increase in lead times was only modest and weaker than the series average.

Firms reported that a wide range of raw materials had increased in price in October, with resin, fuel and oil-related products particularly highlighted.