Canadian manufacturing improves

April data from the RBC PMI highlighted a sustained recovery in business conditions across the Canadian manufacturing sector.

At the same time, manufacturers have pointed to the weakest rate of input price inflation so far in 2016, despite rising demand for raw materials and reports of renewed stock shortages among suppliers.

Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI registered 52.2 in April, up slightly from 51.5 in March and above the neutral 50 threshold for the second month running.

And, although indicative of a moderate improvement in business conditions, the latest reading was the strongest since December 2014. This was mainly driven by a rebound in output, new business and employment growth. Meanwhile, the only negative influence on the headline PMI was a fractional reduction in stocks of purchases during April, which reflected ongoing caution among manufacturers in relation to their inventory management.

“The recent trend in Canadian manufacturing is encouraging,” says Craig Wright, senior vice-president and chief economist of RBC. “The pickup in activity has come alongside solid U.S. domestic demand, and a more competitive currency which supports export activity.”

In particular, job creation gathered pace across the manufacturing sector in April, as highlighted by the strongest upturn in payroll numbers since December 2014.

And, while most survey respondents cite elevated imported raw material costs, some firms commented on successful price negotiations following the recent strengthening of the Canadian dollar. In contrast to the trend for input costs, the latest data highlighted a slight reduction in factory gate charges across the manufacturing sector, which was attributed to squeezed pricing power and efforts to stimulate client demand.

Regional highlights include:

• all monitored regions, except Alberta & B.C., have signaled an upturn in manufacturing performance;
• Quebec recorded a marked rebound, with new work rising at the fastest pace since August 2012; and
• Ontario continued to outperform in April, but growth momentum has slowed since March.

Check out the full manufacturing report.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.