CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

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CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

CANADA'S LEADING INFORMATION SOURCE FOR THE METALWORKING INDUSTRY

Manufacturing activity improves

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RBC Canadian Manufacturing PMI points to strengthening activity in June

An increase in June manufacturing activity more than reversed the modest declines experienced in May and April in Canada, according to the latest figures from the RBC Canadian Manufacturing PMI.

Manufacturing activity climbed to 53.5 in June, from 52.2 in May and 52.9 in April.

Much of the increase in the June index reflected stronger growth in new orders and output although higher employment and longer delivery times also contributed to the improvement. The output index increased to 53.8 from 51.8 in May with respondents attributing the pickup to improving economic conditions and rising client spending. The new orders index also increased solidly, rising to 54.1 from 52.6 the prior month. This left both of those indexes at their highest levels since December.

The employment index also rose to a year-to-date high, although the 52.6 reading marked a relatively modest improvement from the 52.4 reading in May. The supplier delivery times index, which enters inversely into the calculation of the headline PMI, dropped to 44.3 from 46.4 as delivery times lengthened. The only sub-index that did not contribute to the improvement in the headline index was the stocks of purchases index, which slipped modestly to 49.6 from 49.9 in May, although the dip was attributed largely to lower pre-production inventories due to “stronger than expected production requirements in June.”

The strengthening in the PMI in June followed two consecutive dips in May and April that still did not reverse improvements in March and February following a likely weather-related slowing to a recent low of 51.7 in January.

The broadly positive trajectory in manufacturing conditions is in line with other, albeit less-timely, indicators (April manufacturing, retail, and wholesale sales, for examples) that have shown signs of strengthening in the spring after colder than normal temperatures appeared to slow activity during the winter. The return to seasonally normal temperatures is expected to push GDP growth gradually higher in the second quarter of 2014 to 2.0 per cent after a 1.2 per cent increase in the first quarter.

RBC’s Nathan Janzen economist, says manufacturing activity is likely to continue to provide near-term support to the economy resulting from underlying improvement in the US economy (notwithstanding a weather-related decline in first-quarter 2014 GDP in that country) and a weaker Canadian dollar.

RBC Economics

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