Manufacturing AUTOMATION

Manufacturing conditions in March jump to highest level so far this year: RBC

April 4, 2012
By Manufacturing AUTOMATION

Operating conditions in Canada’s manufacturing sector strengthened in March, according to the RBC Canadian Manufacturing Purchasing Managers Index (RBC PMI), a monthly survey conducted in association with Markit and the Purchasing Management Association of Canada (PMAC), 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 – registered 52.4 in March, up from 51.8 in February, signalling a modest improvement in Canadian manufacturing business conditions. Index readings above 50.0 signal expansion from the previous month; readings below 50.0 indicate contraction.

The RBC PMI found that new orders and output both increased further in March, reflective of greater client demand. However, production growth was nonetheless the second weakest in the 18-month survey history. Job creation was at a four-month high in March, while the rate of input price inflation eased since February.

“Activity in the Canadian manufacturing sector has been bucking the general trend of softening conditions, particularly in Europe and Asia,” said Craig Wright, senior vice-president and chief economist, RBC. “Canadian manufacturers will continue to benefit from the strengthening U.S. economy, which started 2012 on a much more promising note. We expect to see continued demand for key Canadian exports, such as autos, machinery and lumber, south of the border, with real exports returning to pre-recession peak levels in 2013.”


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 March survey include:

• Output and new orders both increased modestly in March;

• Fastest rate of job creation since last November; and

• Average selling prices fall for first time in 18-month series history.

Firms generally linked the latest improvement in business conditions to greater client demand. Incoming new work rose modestly in March, with the latest expansion the strongest in three months. Moreover, new export orders also increased over the month, albeit fractionally, in contrast to declines reported in January and February.

Reflective of greater client demand, Canadian manufacturers raised production during the latest survey period. Output has increased in each month since data collection began in October 2010, but the latest rise was nonetheless the second weakest in this sequence of growth. Panelists also depleted stocks of finished goods to help fulfill new order requirements, while backlogs of work fell moderately overall.

The amount of inputs purchased by monitored companies increased in March, albeit marginally and at the weakest pace in the 18-month series history. Meanwhile, input inventories were depleted for the seventh consecutive month. A number of panelists cited leaner stock holding policies. Concurrently, suppliers’ delivery times lengthened further in March. Anecdotal evidence suggested that vendors struggled to meet greater demand for inputs during the latest survey period.

Employment in Canada’s manufacturing sector rose solidly in March. Approximately one-fifth of respondents hired additional staff (while 11 percent reduced their workforces), with the overall rate of job creation the strongest since last November.

Canadian manufacturers reported higher input costs in March, with fuel, steel and resin all particularly mentioned as having increased in cost. Although the rate of input price inflation remained strong, it was nonetheless the weakest in three months. Meanwhile, firms reduced their selling prices during the latest survey period, largely commenting on stronger competitive pressures. Notably, this was the first reduction in factory gate prices in 18 months of data collection.

Regional highlights include:

• PMI data signalled that manufacturing business conditions improved in all four regions in March. The weakest monthly improvement was registered in Alberta and British Columbia;

• New order volumes increased at the fastest pace in Quebec, but were broadly unchanged in Alberta and British Columbia;

• Job creation was registered in all four regions during March; and

• The fastest rate of input price inflation was reported by manufacturers in Ontario.

“Following the sharp slowdown in January, growth in the Canadian manufacturing sector continued to recover in March. New orders increased at the fastest pace in 2012 so far, helped by greater client demand. However, the latest improvement in overall business conditions was modest, with output growth the second slowest in 18 months of data collection,” said Cheryl Paradowski, president and CEO, PMAC. “Input cost inflation eased in March, while Canadian manufacturers reduced their selling prices slightly.”

The report is available at

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