Growth strong, but supply shortages drive record inflation: Canada Manufacturing PMI
- October 3, 2021
The latest IHS Markit Canada Manufacturing PMI has been released, and it shows growth in output, new orders and employment.
The headline seasonally adjusted purchasing managers’ index registered 57.0 in September, virtually the same as August’s 57.2. Growth has now been continuous for 15 months in a row, and the latest expansion is among the sharpest in the survey’s 11-year history.
Canada's manufacturing sector ended the third quarter of the year with another strong expansion. Despite a rise in COVID cases, output and new orders rose at historically elevated rates. However, global supply shocks persisted, leading to longer delivery times and a subsequent joint-record increase in backlogs. Amid efforts to protect against future shortages, firms raised their pre-production inventories at a rate that ties for the highest recorded to date. Meanwhile, higher prices for steel, oil and transportation underpinned record rates of input and output price inflation.
Canadian manufacturers recorded another solid upturn in production volumes, although the rate of growth moderated from August's four-month peak. Surveyed respondents commented on supportive demand conditions, new product launches and increased efforts to boost output.
Similarly, new orders rose sharply, but at a softer pace than that seen in August. Firms mentioned strong demand conditions in both domestic and international (particularly the US) markets, despite a rise in COVID-19 cases.
“While we can draw many positives from the latest data, issues surrounding global supply remain,” said Shreeya Patel, economist at IHS Markit. “Material scarcity led to higher prices, shipping delays, and subsequent increases in incomplete work. Anecdotal evidence suggests firms sought to clear their backlogs, but a lack of skilled workers hindered productivity.”