Canadian manufacturing hit nine-month low in January

The Canadian manufacturing sector declined in January, remaining in positive territory, but continuing a downward trend that resulted in a nine-month low, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI).

Last month’s RBC PMI reading was 51.7 on a seasonally adjusted basis, down from 53.5 in December. A reading above 50 indicates expansion. However, RBC said the January index indicates the slowest improvement in business conditions since April 2013.

“Canada’s manufacturing sector continued to grow in January, albeit at a slower pace than December,” said Craig Wright, senior vice-president and chief economist, RBC. “Underlying economic conditions – such as stronger growth in the U.S. economy and a weaker Canadian dollar – remain supportive for the outlook for domestic manufacturing in the period ahead.”

Output and new business growth were both the weakest for five months in January. Meanwhile, staffing levels were reduced for the first time in two years, and manufacturers responded to the moderation in new order growth by cutting their input buying and pre-production inventory levels during the latest survey period.

Production levels in the Canadian manufacturing sector increased for the ninth successive month, but the rate of growth was the least marked since last August. Anecdotal evidence generally suggested that slower output growth reflected softer rises in demand, especially from domestic sources. January data pointed to a moderation in total new order growth, despite an acceleration in export sales. The latest survey highlighted that new orders from abroad increased at the most marked pace since September 2013, with some manufacturers noting improved spending patterns in developed markets.

RBC PMI is a monthly survey, conducted in association with Markit, a global financial information services company, and the Supply Chain Management Association (SCMA).

The report is available at www.rbc.com/newsroom/pmi.