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

Subdued performance of manufacturing sector continues in April

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The seasonally adjusted S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) signalled another deterioration in operating conditions during April, however, the rate of contraction was again marginal. PHOTO courtesy Rapid Gear

The performance of Canada’s manufacturing economy continued to worsen in April as output and new orders both fell again, the S&P Global Canada Manufacturing PMI indicates.

Firms cut their purchasing activity in response and sought to utilise inventories instead. However, efforts to keep on top of workloads led to some marginal employment growth as manufacturers retained some confidence in the outlook. Price indices both shifted upwards in April.

The seasonally adjusted S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) signalled another deterioration in operating conditions during April, extending the current downturn to 12 months. However, the rate of contraction was again marginal, with the PMI registering 49.4. That was slightly down on March’s 49.8 and a three-month low.

Output volumes declined in April for a ninth successive month as lower sales again led firms to reduce their production levels. New orders fell for a fourteenth successive month. Although modest, the decline was the steepest since January amid reports that high prices and soft market demand were weighing on sales. Weak underlying global demand was also reported to have led to a reduction in new export orders during April, extending the current downturn to eight months. The rate of contraction was also marked and the steepest since January.

Manufacturers were understandably reticent when it came to input buying, instead signalling a continued preference to utilise existing inventory wherever possible. Overall, purchasing activity declined for a twenty-first month in a row, though only slightly. Meanwhile, stocks fell again but only modestly and to the weakest degree since January.

In contrast, firms took on additional staff for a third month in a row. The marginal increase in employment reflected efforts to keep on top of workloads, and firms were broadly successful in this regard as backlogs of work declined again.

It was the twenty-first successive month in which backlogs have fallen, with the latest reduction marked.

Meanwhile, the time taken for inputs to arrive at Canadian manufacturers lengthened in April for a fourth month in a row. The modest worsening of delivery performance reflected stock shortages at suppliers and ongoing logistical challenges, especially on shipping routes.

Suppliers were also reported to have raised their prices, and this helped to explain another round of input cost inflation in April. Overall, it was the eleventh successive month that an increase in input prices has been registered, and inflation in April was the highest recorded by the survey since last November. Manufacturers responded by increasing their own charges again, in line with a trend that now extends to nearly four years. The rate of inflation was however modest amid reports that competitive market pressures had limited pricing power.

Finally, manufacturers retained confidence in the outlook, and typically expect to see output rise from present levels in the coming 12 months. Sales volumes are forecast to rise amid hopes of a pickup in demand. However, sentiment remains below trend despite improving to a three-month high. There are concerns amongst the survey panel that high interest rates will continue to weigh on market activity.

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