Manufacturing AUTOMATION

Manufacturing output stagnates, despite a marginal rise in April: RBC PMI

May 1, 2013
By Manufacturing AUTOMATION

The Canadian manufacturing sector stagnated in April, an improvement from the contraction observed in March, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI).

The headline RBC PMI—a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector—registered 50.1 in April and, posting only slightly above the 50.0 no-change mark, signalled broadly no change in overall manufacturing business conditions. However, the PMI nonetheless rose from a survey-low of 49.3 in March, which was consistent with a modest deterioration in operating conditions.

The RBC PMI found that manufacturing output levels in April were largely the same as March, despite the volume of new orders having increased, albeit only marginally. Employment was also little-changed, seeing only a slight rise in staff numbers since March. On the price front, the rates of increase for both input costs and output charges eased, with the rate of input price inflation, in particular, the slowest in nine months.

“Canada’s manufacturing sector kept its head above water in April, registering some improvement over the surprising series low recorded last month,” said Craig Wright, senior vice-president and chief economist, RBC, in a statement. “While the overall gains made in April were tepid, we expect manufacturing output to pick-up, augmenting export activity and supporting Canada’s growth prospects.”


The headline RBC PMI reflects changes in output, new orders, employment, inventories, prices and supplier delivery times.

Key findings from the April survey include:

• Output levels largely unchanged in April, following a reduction in March;
• marginal rise in total new work; and
• slowest rate of input price inflation since July 2012.

Incoming new work at Canadian manufacturers increased in April, with firms generally linking this to greater demand. Although the rate of growth was only marginal and weaker than the series average, it was nonetheless in contrast with a reduction in March. Overall, the rise in total new work also reflected larger volumes of new export orders, which rose at the strongest rate in six months during April.

Despite higher new order requirements, production levels were largely the same as one month previously. The stagnant output trend in April nevertheless follows a decline in March. Meanwhile, stocks of finished goods were accumulated for the first time in 2013 to date, albeit marginally, and backlogs of work continued to fall for the seventh consecutive month.

The quantity of inputs bought by manufacturers was also broadly the same as in the previous survey period, rising only fractionally over the month. Stocks of purchases, meanwhile, were depleted for the sixth consecutive month in April, and at the joint-fastest rate since January 2012.

Suppliers’ delivery times continued to lengthen in April, with approximately seven per cent of panellists reporting a deterioration in vendor performance. That said, the latest increase in lead times was the weakest since last December.

After adjusting for seasonal variation, manufacturing employment in Canada was largely unchanged in April. The corresponding index fell further from February’s four-month peak and was the second-lowest since data collection began in October 2010.

In April, manufacturers reported the weakest rise in cost burdens since July 2012. The modest increase in costs nonetheless partly reflected higher prices for raw materials, packaging and transportation. Firms passed on greater costs to clients by raising their selling prices. Output charges rose at a rate in line with the series average that was also stronger than the increase in input prices.

Regional highlights include:

• Solid falls in manufacturing output were recorded for Alberta and British Columbia and Ontario.
• Following a deterioration in March, manufacturing business conditions in Quebec improved during April.
• Manufacturers in Quebec saw the strongest rise in new export work in April.
• Employment growth was recorded in two of the four regions, with the strongest increase posted in Quebec.

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