Canadian manufacturing sector flounders: RBC

Canada’s manufacturing sector grew only marginally in November, says the RBC Canadian Manufacturing Purchasing Managers’ Index.

The headline RBC PMI—an indicator of the health of the manufacturing sector—fell from 51.4 in October to 50.4 in November, hitting the weakest rate of manufacturing growth since data was first available in 2010.

Read: Manufacturing falls to 9-month-low

The fall in the index partly reflected incoming new work remaining broadly unchanged from October, as well as the first contraction in output in 26 months of data collection.

Manufacturers generally cited weak market conditions. Though firms continued to hire additional staff in November, the rate of job creation was only modest.

“Minimal growth in the manufacturing sector reflects the continued global economic uncertainty and the time-lagged impact of other indicators that suggest the Canadian economy weakened during Q3,” says Craig Wright, senior vice-president and chief economist, RBC.

He adds, “We expect the economic weak patch to be short lived, however. As the downside risks plaguing the global economy start to ease, the weight on Canadian export demand and the broader manufacturing sector will as well.”

The survey also tracks changes in output, new orders, employment, inventories, prices and supplier delivery times.

The volume of new orders received by Canadian manufacturers was broadly unchanged from October. The flat new orders trend was one of the factors behind a fall in production during November.

This was the first reduction in output in 26 months of data collection, but the rate of decline was only marginal.

Suppliers’ delivery times nonetheless lengthened further in November, with approximately 11% of firms reporting increased lead times since October. Respondents suggested suppliers were working with less stock, and say Hurricane Sandy affected some vendors.

Manufacturing employment in Canada increased for the tenth consecutive month in November. Where higher staffing levels were reported, firms commented on replacing employees who had recently left. However, the rate of job creation was only modest and the slowest since April.

Firms reported a further rise in cost burdens during the latest survey period, with this largely reflective of higher raw material prices. But the rate of input price inflation was also the weakest in three months.

Manufacturers’ selling prices increased in November as panelists passed on greater costs to clients. Despite having quickened since October, the latest increase in output prices remained modest overall.

“November was one of the most difficult months for Canadian manufacturers in the past two years,” says Cheryl Paradowski, president and chief executive officer of PMAC. “Nonetheless, firms continued to hire additional staff, although the rate of job creation slowed for the sixth month running and was only modest.”

Read the full report.