[ Back ]   [ More News ]   [ Home ]
IHS Markit Canada Manufacturing PMI®

Weakest Improvement in Manufacturing Conditions for Almost Two Years in December

Key findings:

LONDON — (BUSINESS WIRE) — January 2, 2019 — Canadian manufacturers experienced a renewed slowdown in growth at the end of 2018, with both production volumes and incoming new work expanding at softer rates than in November. The pace of manufacturing job creation also moderated in December, partly reflecting a drop in business optimism to its weakest since February 2016.

At 53.6 in December, down from 54.9 in November, the headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) signalled the weakest improvement in overall business conditions since January 2017.

A moderation in output growth to its slowest for two years was a key factor weighing on the headline PMI in December. Survey respondents commented on less favourable demand conditions, particularly in the energy sector. There were also reports that global trade frictions had held back export sales during the latest survey period.

New business volumes continued to rise in December, but at one of the slowest rates seen over the past two years. This partly reflected a stagnation in export sales.

Latest data indicated that new work from abroad was broadly unchanged in December, which ended a 12 month period of sustained expansion. Some firms noted a drag on export competitiveness from higher raw material costs (particularly steel). There were also reports that export demand from US clients had lost momentum.

Despite softer rates of output and new business growth, the latest survey revealed an accelerated rise in unfinished work. Higher backlogs of work have been recorded for three months running, driven by ongoing capacity pressures.

Manufacturers continued to add to their workforce numbers in December, but the rate of job creation slowed from the survey-record peak seen in the previous month. Anecdotal evidence suggested that less upbeat projections for output growth had acted as a brake on staff hiring at some firms.

Business optimism moderated to its weakest for almost three years in December. Reports from survey respondents indicated that concerns about the domestic economic outlook had weighed on business expectations for 2019. Some manufacturers also noted that global trade tensions had the potential to hold back growth in the next 121 months.

Meanwhile, input cost inflation eased to its lowest since August 2017. Manufacturers noted that lower oil-related prices had helped to offset pressure on costs from rising prices for metals. Factory gate charges also increased at a slower pace in December. There was an alleviation of pressure on supply chains at the end of 2018, with lead times for manufacturing inputs lengthening to the least marked extent since April 2017.

Christian Buhagiar, President and CEO at SCMA, said:

“December data signalled a loss of momentum for manufacturers at the end of the year, with stagnating export sales and softer energy sector demand the key factors behind an overall slowdown in production growth. Survey respondents also commented that global trade tensions has led to greater risk aversion among clients. As a result, manufacturing companies have curtailed their expectations for output growth in 2019, with business optimism easing to its lowest for almost three years.

"Quebec was a notable outperformer in December as manufacturing conditions improved at the fastest pace for four months. Meanwhile, manufacturers in Ontario saw softer overall growth than in November, while those based in Alberta & British Columbia experienced the weakest upturn for just over two years."

Output

December data pointed to a renewed slowdown in production growth across the Canadian manufacturing sector. The seasonally adjusted Output Index has now dropped in three of the past four months, with the latest reading signalling the weakest rate of expansion since December 2016.

A number of manufacturers cited softer demand from the energy sector, alongside a headwind to growth from ongoing global trade tensions.

New Orders

The seasonally adjusted New Orders Index revealed a solid upturn in new work at the end of 2018, but the rate of expansion continued to lose momentum. Moreover, the latest reading was one of the lowest seen over the past two years.

Survey respondents noted that less favourable demand conditions in both domestic and export markets had held back new order growth in December.

New Export Orders

Manufacturers indicated that new export sales were broadly unchanged in December, which ended a 12 month period of sustained expansion.

Anecdotal evidence cited weaker demand from clients in the US. Some firms also reported a drag on export competitiveness from higher raw material costs (particularly steel).

Backlogs of Work

Despite a softer rise in new business volumes, latest data signalled a faster accumulation of unfinished work at manufacturing companies. The seasonally adjusted Backlogs of Work Index pointed to the sharpest rate of increase since August.

Panel members noted that supply chain disruptions had contributed to higher levels of unfinished business at the end of the year.

Stocks of Finished Goods

Adjusted for seasonal influences, the Stocks of Finished Goods Index dropped back below the 50.0 no-change value in December. The latest reading was the lowest for three months and signalled a marginal reduction in post-production inventories.

Manufacturers suggested that heightened uncertainty about the demand outlook had led to more cautious inventory policies.

Employment

A relatively strong rate of job creation was maintained across the manufacturing sector in December, although the seasonally adjusted Employment Index eased from the survey-record high seen in the previous month.

Increased staffing levels were widely linked to new product launches and long-term investment in additional plant capacity.

Quantity of Purchases

Growth of purchasing activity rebounded slightly from the 11 month low seen during November. However, the seasonally adjusted Quantity of Purchases Index continued to signal a subdued expansion of input buying in comparison to the trend seen in the first half of 2018.

Some survey respondents noted that reduced supply chain pressures had lessened the need to build up safety stocks in December.

Suppliers’ Delivery Times

The seasonally adjusted Suppliers' Delivery Times Index remained well below the 50.0 no-change value in December, thereby signalling a sustained deterioration in vendor performance.

However, the latest reading picked up since November and signalled the least marked lengthening of suppliers' delivery times for just over one-and-a-half years.

Stocks of Purchases

Stocks of purchases continued rise in the manufacturing sector during December.

The latest index reading was nonetheless the lowest since April and signalled only a modest accumulation of pre-production inventories.

Input Prices

The seasonally adjusted Input Prices Index pointed to another slowdown in cost pressures at manufacturing companies in December, with the rate of inflation the weakest seen since August 2017.

Where a rise in input prices was reported, survey respondents mainly cited greater steel costs. There were reports that lower prices for oil-related inputs had helped to moderate the overall rate of cost inflation in December.

Output Prices

Factory gate price inflation slowed for the second month running and reached its lowest point since March, according to the seasonally adjusted Output Prices Index.

Softer rises in average prices charged were widely linked to competitive pressures and weaker input cost inflation during December.

Future Output

Business expectations regarding the year ahead outlook for manufacturing production continued to moderate in December. The balance of firms forecasting an expansion in their output volumes was the least positive seen since February 2016.

Manufacturers noted that greater concern about the domestic economic outlook had weighed on their growth projections for 2019.

NOTE

The intellectual property rights to the Canada Manufacturing PMI™ provided herein are owned by or licensed to IHS Markit. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without IHS Markit’s prior consent. IHS Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall IHS Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index® and PMI™ are either registered trademarks of Markit Economics Limited or licensed to Markit Economics Limited. IHS Markit is a registered trademark of IHS Markit Ltd. and/or its affiliates. All other company and product names may be trademarks of their respective owners © 2018 IHS Markit Ltd. All rights reserved.



Contact:

IHS Markit
Tim Moore, +44-1491-461-067
Associate Director
Email Contact
or
Joanna Vickers, +44-207-260-2234
Corporate Communications
Email Contact
or
SCMA
Lynne Coles, 416-542-3860
Email Contact