The RBC Canadian Manufacturing Purchasing Managers’ Index indicates a further downturn in manufacturing business conditions in March.
March still posted an improvement from February, which posted a the survey-record-low. Output, new business and employment levels all fell at slower rates than last month. Manufacturers, nonetheless, signaled a solid reduction in work-in-hand (but not yet completed), and inventory levels were reduced again amid concerns about the outlook for client demand.
The headline RBC PMI reflects changes in output, new orders, employment, inventories and supplier delivery times.
At 48.9 in March, up from 48.7 in February, the seasonally adjusted PMI was again below the neutral 50.0. It’s the first back-to-back deterioration in overall business conditions in the survey’s four-and-a-half year history. Moreover, the average reading for Q1 as a whole (49.5) is the weakest since the survey began in 2010.
“We remain confident that as the U.S. economy continues to strengthen and the Canadian dollar becomes more competitive, there will be an uptick in exports, a good sign for manufacturers – we need some time to see this materialize,” says Craig Wright, senior vice-president and chief economist, RBC.
Survey respondents suggested that falling capital spending among clients in the energy sector remained the key factor weighing on new business intakes in March. However, the latest overall decline in incoming new work was modest and less marked than February. Export sales also fell at a slower pace than in February, with some firms commenting on support from exchange rate depreciation and stronger demand from clients in America.
A moderate drop in overall new orders resulted in another decrease in manufacturing production in March. Moreover, the latest survey suggested a lack of pressure on operating capacity, as highlighted by a reduction in backlogs of work for the fourth consecutive month.
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Reduced production schedules and falling workloads contributed to more cautious staff hiring patterns in March. Latest data signaled that payroll numbers decreased for the third month running, although the rate of job shedding moderated from February’s survey-record pace.
A number of manufacturers pointed to deliberate stock reduction policies at their plants in response to the uncertain business outlook. Pre-production inventories decreased at the fastest rate since November 2010, while stocks of finished goods were depleted at the most marked pace in just under three years.