Report: Canadian manufacturing industry’s growth accelerates in February 2023
March 1, 2023 by Manufacturing AUTOMATION/ S&P Global Canada Manufacturing
The latest S&P Global survey data shows accelerated growth in Canadian manufacturing. The seasonally adjusted S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) recorded 52.4 in February. That was up from 51 in January, and the highest reading recorded by the survey since last July. It was also the second month in a row that the index has recorded above the 50 no-change mark that separates growth from contraction.
According to S&P Global, the growth picked up building on the modest gains seen at the start of the year. Both output and new orders rose at their strongest rates since last May. Firms continued to add new jobs to their plants. Confidence in the future also improved, whilst inflation rates continued to ease amid reports of greater stability in supply chains.
“February’s data provided a relatively positive set of data concerning the health of the Canadian manufacturing economy. Growth rates for a range of variables improved, most notably for output and new orders amid reports of firmer market demand,” said Paul Smith, economics director at S&P Global Market Intelligence. “Lower inflation was also seen as a supportive demand factor, and firms themselves experienced a drop of cost inflation since the previous month to a multiyear low. Amid signs of more stability in supply chains, these factors all helped to support an improvement in confidence over the month and partly explained another round of job creation in the sector.”
Both manufacturing output and new orders continued to rise during February, with growth rates picking up from relatively modest levels seen in February to their highest since last May. There were reports of firmer market demand, linked in part to lower inflation and growing confidence in the outlook. However, foreign sales remained subdued, with exports down for a ninth successive month and suggestive that the current upturn in overall orders is being predominately led by the domestic market.
Firms nonetheless displayed growing confidence in the outlook, with this optimism expressed in the latest data on future output expectations. Overall, sentiment rose to its highest level since last July, with firms hopeful that the recent returns to growth in production and demand will be sustained. The planned start of new projects and release of new products were also reasons to be confident.
Manufacturers also expected inflation to retain its recent downward trend. In February, input prices rose to the slowest degree since July 2020 amid reports that greater stability in supply chains was placing some downward pressure on costs. That said, underlying inflation remained elevated, and firms continued to pass on a significant proportion of their cost bases to clients in the form of increased output charges, albeit to the weakest degree in the past five months.
Perhaps reflective of a growing confidence in the outlook, staffing levels increased for a fourth successive month. Higher current production requirements also supported the modest rise in employment, and this upturn in capacity helped to drive backlogs of work down for a seventh successive month.
Firms retained some caution in purchasing activity, instead signalling a preference to utilize inventories in current production rather than purchase new inputs. Buying activity declined for the seventh month in a row, albeit modestly, whilst there was a similar-sized decline in stocks of purchases. Reduced demand for inputs helped to further relieve pressure on vendors. Although average lead times continued to lengthen, reflective of residual raw material shortages at suppliers, they did so again at a historically slow pace.