Business conditions improve sharply in November: manufacturing PMI
- December 3, 2018
The IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) for November hit a three-month high.
The index reached 54.9 for the month, up from 53.9 in October, the biggest improvement in business conditions since August. While growth rates for output and new orders remained softer than seen on average in the third quarter of 2018, job creation showed a “strong and accelerated” upturn. Manufacturers attributed this to rising business investment in plant capacity.
Input cost inflation moderated in November, with lower oil-related prices helping to offset higher costs for imported materials (particularly metals), IHS Markit said. Manufacturing production growth moved up from October's 22-month low, helped by a stronger upturn in new order books. The November data also signalled a solid rise in export sales, with survey respondents mainly commenting on rising sales to U.S. clients – despite which the overall rate of new export order growth remained much softer than seen in the first half of 2018.
While demand slowed relative to earlier in the year, manufacturers also reported renewed acceleration of employment growth in November. The latest expansion of payroll numbers was the fastest since the survey began in October 2010. Anecdotal evidence suggests that efforts to alleviate capacity constraints has encouraged greater business investment and additional staff recruitment.
Supply chain pressures continued in November, as evidenced by another sharp lengthening of delivery times for raw materials. Survey respondents cited low stocks among suppliers and ongoing shipping delays for items imported from Asia. Concerns about raw material availability led to another moderate increase in stocks of purchases across the Canadian manufacturing sector during November. However, latest data signalled the weakest rise in input buying since the end of 2017, partly reflecting more subdued projections for client demand.
While manufacturers are optimistic about growth prospects for the next 12 months, their confidence was up only slightly since October and still among the weakest seen over the past two years. Some firms noted that slower economic growth in Europe weighed on business sentiment in November.
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