IHS Markit Canada Manufacturing PMI®

Production growth eases to 22-month low in October

Key findings:

  • Weakest rises in output and new work for almost two years
  • Robust job creation continues
  • Sharp rise in input costs

Category:

Thursday, November 1, 2018 12:15 pm EDT

Dateline:

LONDON

Public Company Information:

NASDAQ:
INFO
"Quebec appears to have felt the soft patch for global trade most keenly, with manufacturers reporting that new export work fell for the second month running in October."

LONDON--(BUSINESS WIRE)--Canadian manufacturers reported a sustained upturn in overall business conditions in October, but the rate of improvement slowed for the fourth month running. This was highlighted by a fall in the seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) to 53.9, from 54.8 in September. The latest reading signalled the weakest improvement in manufacturing conditions since January 2017. Softer rates of output and new business growth were the main factors weighing on the headline index in October.

Production volumes expanded at the slowest pace since December 2016. Survey respondents cited subdued demand from both domestic and export markets. The latest overall upturn in new work was the slowest for just under two years.

In contrast to the weaker trend reported for new business growth, latest data revealed another robust increase in manufacturing payroll numbers. Higher staffing levels were attributed to long-term business expansion plans and associated efforts to boost operating capacity.

Intense supply chain pressures continued in October, as signalled by another sharp lengthening of lead times for the delivery of materials from vendors. Anecdotal evidence pointed to transport shortages across North America and shipping delays at ports following typhoons in Asia.

Low stocks and longer delivery times among suppliers encouraged raw materials inventory building across the manufacturing sector during October. Pre-production stocks have increased in each of the past 12 months, although the latest rise was only marginal. Stocks of finished goods were depleted again, which some firms linked to a more cautious outlook for client demand.

October data pointed to another sharp increase in average cost burdens at manufacturing companies. Survey respondents commented that steel tariffs and rising transportation costs had resulted in higher input prices.

Meanwhile, factory gate charges also increased at a strong pace in October, with the rate of inflation accelerating slightly since the previous month.

Looking ahead, manufacturers are optimistic overall that their production volumes will rise in the next 12 months. However, the degree of positive sentiment continued to moderate from the recent peak seen in April.

The latest reading signalled the weakest level of positive sentiment since November 2016. Some firms noted that heightened economic uncertainty, particularly in relation to global trade, had weighed on confidence in October.

Christian Buhagiar, President and CEO at SCMA, said:

“October data suggest that manufacturing production growth continued to ease from the elevated rates seen over the summer. More subdued demand in both domestic and export markets contributed to the weakest rise in new order volumes since November 2016. At the same time, input cost inflation remained sharp and delivery times for materials lengthened amid stretched international supply chains.

"Regional data indicated that rising spending across the energy sector has helped to moderate the slowdown in manufacturing growth, with firms in Alberta & British Columbia reporting the steepest rises in output and employment.

"Quebec appears to have felt the soft patch for global trade most keenly, with manufacturers reporting that new export work fell for the second month running in October."

Methodology

The IHS Markit Canada Manufacturing PMI® is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

The headline figure is the Purchasing Managers’ Index® (PMI). The PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). For the PMI calculation the Suppliers’ Delivery Times Index is inverted so that it moves in a comparable direction to the other indices.

Underlying survey data are not revised after publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series.

For further information on the PMI survey methodology, please contact economics@ihsmarkit.com.

About IHS Markit

IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2018 IHS Markit Ltd. All rights reserved.

About SCMA

The Supply Chain Management Association (SCMA) is Canada’s largest association for supply chain management professionals. We represent 7,500 members as well as the wider profession working in roles that cover sourcing, procurement, logistics, inventory, and contract management. SCMA sets the standards for excellence and ethics, and is the principal source of professional development and accreditation in supply chain management in Canada. www.scma.com .

About PMI

Purchasing Managers’ Index® (PMI®) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to ihsmarkit.com/products/pmi.html.

Disclaimer

The intellectual property rights to the data provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index® and PMI® are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates.

Contact:

IHS Markit
Tim Moore, +44-1491-461-067
Associate Director
tim.moore@ihsmarkit.com
or
Joanna Vickers, +44-207-260-2234
Corporate Communications
joanna.vickers@ihsmarkit.com
or
SCMA
Lynne Coles 416-542-3860
lcoles@scma.com