Canada’s economic performance has hit a new high with the latest figures indicating that manufacturing performance is the strongest since 2014.
The Purchasing Managers’ Index (PMI) reached a 27-month high of 54.6 in February, the strongest improvement in business conditions since November 2014, according to Markit Canada Manufacturing PMI Report.
Canada’s manufacturing sector remained on track to record its fastest quarterly upturn in business conditions since Q4 2014. February data revealed robust and accelerated growth in new order intakes, input buying and production levels. This contributed to a sustained recovery in job creation and business confidence across the manufacturing sector.
The average reading for Q1 2017 so far (54.1) is up from 51.5 in Q4 2016 and the highest quarterly figure for over two years. Faster rates of output and new business growth were the main factors boosting the headline PMI in February. In both cases, the rate of expansion was the steepest since late-2014.
“IHS Markit’s PMI data reveal a strong reacceleration in manufacturing growth so far this year, helped by improving domestic economic conditions and greater sales to clients in the oil and gas sector,” notes Tim Moore, senior economist at survey compilers IHS Markit. “The boost from rising spending by energy sector companies led to a surge in manufacturing growth across Alberta and BC, with production volumes expanding at the fastest pace since late-2010.
“Across the Canadian manufacturing sector as a whole, business optimism about the 12-month outlook reached its highest level since early-2014. This contributed to renewed inventory building and the steepest rise in payroll numbers for over two years in February.
“Stronger demand for inputs continued to exert pressure on manufacturing supply chains, with delivery times lengthening amid widespread reports of depleted stocks among vendors. Against a backdrop of rising global commodity prices, this placed upward pressure on raw material costs and meant that the overall pace of cost inflation remained close to its strongest for two-and-a-half years.”
Survey respondents noted that greater demand from domestic markets, especially the energy sector, had underpinned the improvement in manufacturing growth. There were also reports that the upturn in new order intakes had been supported by customers’ efforts to replenish inventories. Meanwhile, export sales growth remained subdued, and therefore provided only a marginal contribution to overall new business gains in February.
The latest survey pointed to a rebound in manufacturing sector confidence regarding the year-ahead business outlook. Moreover, the degree of positive sentiment reached its strongest for exactly three years. This was linked to resurgent optimism about domestic demand and the general outlook for the Canadian economy.
Greater business confidence contributed to the strongest increase in employment for 27 months in February. Manufacturers also sought to boost their stocks of finished goods in line with expectations for improved sales growth. The rise in post-production inventories was the strongest since April 2014. However, stocks of inputs were depleted in February, which was attributed to rising demand for inputs and longer delivery times from suppliers.