Manufacturing AUTOMATION

Manufacturing sector registers marginal improvement in January: report

February 1, 2013
By Manufacturing AUTOMATION

The RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI) pointed to only marginal increases in both output and new orders in Canada’s manufacturing sector in January; however, this marks the first rise in production levels since last October.

The headline RBC PMI – a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector – signalled only a marginal improvement in Canadian manufacturing business conditions in January. At 50.5, the RBC PMI was only slightly higher than the survey-low of 50.4 recorded in both November and December.

The RBC PMI found that output increased for the first time in three months in January, albeit only slightly, but new order growth slowed since December and was only marginal. The rate of job creation also weakened, easing to a 12-month low, while the rate of input price inflation strengthened to its fastest since last September.

“The Canadian manufacturing sector experienced a relatively lacklustre start to the New Year amid ongoing global economic uncertainty,” said Craig Wright, senior vice-president and chief economist, RBC, in a statement. “As some of the more extreme downside risk scenarios look less likely now, we should see confidence in the global economy improve, paving the way for a stronger recovery in Canadian manufacturing.”

In addition to the headline RBC PMI, the survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times.

Although the volume of new orders received by Canadian manufacturers rose further in January, with one-in-four panellists reporting an increase since December, the rate of growth was only marginal. Firms generally cited weak client demand. New export orders, meanwhile, were broadly unchanged in the latest survey period, but this was nonetheless an improvement from the declines recorded in the previous two months.

After having fallen for two consecutive months, manufacturing production increased in January. However, output growth was only slight. Meanwhile, stocks of finished goods decreased at the sharpest rate since last July, and backlogs of work fell solidly and for the fourth month running.

Reflective of higher output requirements, the quantity of inputs bought by manufacturers increased in January. Purchasing activity rose modestly, but growth remained weaker than the series average. Input inventories, meanwhile, fell for the third consecutive month and at the strongest rate in a year.

Suppliers’ delivery times lengthened further in the latest survey period. Panellists suggested that the combination of low inventories and capacity issues at suppliers contributed to the latest deterioration in vendor performance.

Employment in Canada’s manufacturing sector increased in January, taking the current sequence of job creation to 12 months. However, the rate of growth has slowed continually since reaching a peak last May, with the latest expansion only marginal.

Firms reported higher input costs in January, with raw materials such as resin, chemicals and metals particularly mentioned as having increased in price. Overall, the rate of inflation was the strongest in four months, but slower than the series average. Companies passed greater costs on to clients by raising their charges, but selling prices nonetheless rose at a weaker pace than costs overall.

Regional highlights include:

• Manufacturing business conditions in both Alberta and British Columbia and Ontario improved in January.
• Reduced levels of new business only posted in Quebec, with growth signalled elsewhere.
• Strongest rate of job creation recorded by manufacturers in Ontario.
• All four regions recorded faster rates of input price inflation in January, with the strongest rise posted in Alberta and British Columbia.

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