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Canadian manufacturers experienced a further improvement in overall business conditions during July, according to the RBC PMI. This was driven by faster rises in output, new orders and employment at the start of the third quarter. Meanwhile, input cost inflation continued to moderate, which in turn contributed to the slowest rise in manufacturers’ output charges so far this year.

Read: Manufacturing rebounds in Junes

At 54.3 in July, up from 53.5 in June, the headline seasonally adjusted RBC Canadian Manufacturing PMI posted above the neutral 50.0 value for the sixteenth consecutive month. The latest reading was the highest since November 2013 and signalled a robust overall improvement in manufacturing sector business conditions.

“Canada’s manufacturers kicked off the second half of 2014 on stronger footing, clearly benefiting from improving global economic activity – it’s encouraging to see the momentum,” says Paul Ferley, assistant chief economist, RBC. “With the U.S. economy pushing ahead, we expect this trend to continue.”

Read: Manufacturing remains strong

Reports from survey respondents cited improving underlying demand and greater confidence among clients. Data also points to a solid rise in payroll numbers with the rate of employment growth reaching its strongest since September 2013.

But despite a solid increase in input buying, pre-production inventory volumes dipped for the third month running. Meanwhile, stocks of finished goods also decreased in July. The latest reduction in post-production inventories was the sharpest for 12 months, with some firms citing stronger than expected sales at their plants.

Read: Canadian manufacturers struggling

Meanwhile, input cost inflation eased further from the near-three year high seen during March. Although still sharp, the latest rise in average cost burdens was the least marked since January. A softer rise in input prices during July contributed to the weakest increase in manufacturers’ output charges since December 2013.

Originally published on Advisor.ca

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