Canada Manufacturing PMI: Expects Growth Momentum To Continue

PMI measures the activity level of purchasing managers in the service sector. They measure month on month changes in key indicators, such as inventories, price of goods and employment, and provides overall insight on the purchasing activity.

Reading above 50 indicates expansion and reading below 50 indicates contraction. RBCPMI is a monthly survey conducted in association with Markit, leading global financial information services company and the Supply Chain Management Association (SCMA). It provides early insight of trends in Canadian manufacturing sector.

Canada Manufacturing Purchasing Managers' Index for the month of June was released July 4th, 2017.

Recently in April 2017, PMI saw a six-year peak and signalled a robust rise in purchasing activity. And the momentum continued in May as well. Production volumes in May 2017 saw upturn, although the rate of expansion saw moderation. Output, new orders and employment all increased significantly during 2017 to date.

According to Tim Moore, Senior Economist at survey compilers HIS Markit: “Canadian manufacturers achieved another strong upturn in their new order books during May, underpinned by rising sales across both domestic and export markets. Higher levels of new work have propelled a sharp and sustained rebound in manufacturing production so far in 2017, which contrasts with the soft patch seen during the previous two years.

“The latest survey revealed one of the largest rises in staffing numbers since late 2011, which provides evidence that risk aversion has receded among manufacturing firms in response to greater workloads.

“Efforts boost operating capacity led to a continued restocking of manufacturing inputs, with the pace of inventory accumulation, one of the steepest since the survey began in 2010. However, there were signs of growing pains during May, as vendor lead times for raw materials and semi-manufactured components lengthened to the greatest degree for over three years.”

According to Christian Buhagiar, President and CEO, SCMA, “The manufacturing sector performed solidly during May, with the improvement in business conditions almost matching the six-year peak seen in April.

“The energy sector rebound and increased spending by domestic clients continued to drive the recovery, but there were also signs that export sales have started to flourish. The increase in new work from abroad was the strongest for two-and-a-half years during May, led by manufacturers based in Ontario.

“Survey respondents reported supply chain pressures and low inventory among vendors, driven by rising demand for inputs and efforts to rebuild inventories across the manufacturing sector. As a result, suppliers’ delivery times lengthened to the greatest extent since March 2014.”

Chart for the data

As the chart suggests, 2017 has been bullish for the Canadian manufacturing sector. The headline index has registered above the 50 mark with no change since April 2016.