Report: Canadian manufacturing growth strong in the third quarter

Canadian manufacturing showed robust expansion in the third quarter, according to the latest results of IHS Markit’s purchasing managers survey.

Output and new orders increased despite rising COVID cases. However, global supply chain disruptions led to longer delivery times and caused subsequent increases in backlogs. Firms raised their pre-production inventories at the joint-quickest rate in the survey to date in their efforts to protect against future shortages.

The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered 57 in September, little-changed from 57.2 in August. The latest reading extended the period of growth to 15 successive months, with the latest expansion among the sharpest in the 11-year history of the survey.

“Canada’s manufacturing sector recorded another healthy improvement in operating conditions in September, despite infection rates rising in key provinces. Consumer demand remained strong and in turn supported output growth, said Shreeya Patel, economist at IHS Markit.

Canadian manufacturers recorded another solid upturn in their production volumes. Respondent shared that supportive demand conditions, new product launches and increased efforts helped boost output. New orders rose sharply, but at a softer pace than that seen in August.

Firms saw strong demand conditions in both domestic and international (particularly the US) markets, despite a rise in COVID-19 cases. To meet growing demands and output, firms saw a rise in employment levels, although the expansion was the softest since February. Labour shortages and difficulties finding skilled workers impacted hiring activity.

Virus-related restrictions, material scarcity, container shortages and freight delays caused the longest supplier delivery delays that were similar to April 2020. This, in addition to hiring challenges, has caused a record rate of backlog accumulation.

Material scarcity and robust demand for inputs led suppliers to hike their fees in September. The overall rate of cost inflation accelerated from August’s previous peak to a new series high.

Goods producers expect output to increase over the coming 12 months, with the overall level of positive sentiment improving to the highest recorded since May 2019.