Manufacturing AUTOMATION

Mfg sector dips to record low in October 2015: RBC

November 16, 2015
By Manufacturing AUTOMATION

Nov. 16, 2015 – The October RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI) survey pointed to another downturn in overall business conditions, with output, new orders and employment all declining since the previous month. Moreover, new export sales dropped for the first time since April, with survey respondents noting that weaker global economic conditions had weighed on new business volumes.

Meanwhile, input costs rose at a sharp and accelerated pace in October, which placed pressure on operating margins and contributed to a further slight increase in factory gate charges.

Adjusted for seasonal influences, the PMI posted 48.0 in October, down from 48.6 in September and below the neutral 50.0 threshold for the third month in a row. Moreover, the latest reading signalled the sharpest rate of deterioration since the survey began in October 2010.

“Heightened global economic uncertainty and ongoing energy price weakness continues to weigh on the Canadian manufacturing sector, as indicated by October’s record-low reading of 48.0,” said Craig Wright, senior vice-president and chief economist, RBC. “As we move toward the end of the year, we expect that a strengthening U.S. economy and weaker Canadian dollar will fuel demand for Canada’s exports, resulting in a shift to positive growth territory.”

Key findings from the October survey included:

• Sharpest deterioration in business conditions since the survey began in October 2010;
• Production levels fell at a steeper rate in October, despite softer decline in new orders; and
• Manufacturing employment numbers decreased for the fourth consecutive month.

Alberta and British Columbia remained the worst performing regions in October, while Quebec experienced a renewed deterioration in manufacturing sector performance. Meanwhile, Ontario and the rest of Canada continued to record an overall upturn in manufacturing conditions.

“The lack of spending by Canada’s oil and gas sector, and weak economic conditions abroad, made October a very tough month for Canada’s manufacturing sector,” said Cheryl Paradowski, president and chief executive officer, SCMA. “This latest fall in production was made worse by manufacturers cutting into their inventories, as the fall in new orders from Canadian manufacturers has levelled off since September. Despite these challenges, we see evidence that employers have tried to limit job cuts as much as possible through initiatives like work-share arrangements, and want to retain their staff in anticipation of future growth.”

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