Courtesy of IHS MarkitClick image to enlarge

Operating conditions in Canada’s manufacturing sector showed sharp improvement in January and continued their growth pattern, according to data released by the IHS Markit Canada Manufacturing Purchasing Managers’ Index.

Output, new orders, purchases and employment all expanded while sentiment improved. However, delivery delays, port congestions and a rise in Omicron cases swept the nation. Vendor performance deteriorated sharply, resulting in poor input availability and weaker output growth.

Disrupted supply chains paired with materials shortages continued to cause sharp price pressures. That said, both input and output price inflation moderated in January.

The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) registered at 56.2 in January, down slightly from 56.5 in December. This signalled a sharp overall expansion, albeit the joint-weakest for 11 months. Growth has been seen in each month since July 2020.

Central to the moderation was a slowdown in output growth. Output rose at the softest pace for over a year-and-a-half amid weak input availability and increased disruption from COVID-19.

While output growth softened, domestic demand for Canadian manufactured goods accelerated during the start of the year.

Panel comments suggested that despite the presence of virus-related restrictions, demand remained strong. Similarly, sales to international markets rose - albeit at a slower pace in January.

Faced with increasing orders, firms in Canada raised their headcounts. The rate of growth was solid, and the joint-strongest since July 2021. Despite this, backlogs rose markedly, and at one of the quickest rates in the survey's 11-year history.

The sharp rise in backlogs was a result of weak input availability and poor vendor performance. Lead times were especially lengthy.

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