Canadian manufacturing’s expansion remains robust, according to data released today from IHS Markit Canada’s Purchasing Managers Index (PMI).

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Output growth accelerated while new orders rose at a solid pace. Firms continued to engage in advance ordering to protect against shortages, according to IHS.

The headline seasonally adjusted PMI registered at 57.2 in November, down slightly from 57.7 in October. Growth has been seen in each month since July 2020, with the latest expansion among the strongest in over 11 years of data collection.

Manufacturers recorded the fastest rise in production levels for three months, which was linked to increased workloads. The overall rate of expansion was strong, and in line with the average seen for 2021 so far.

New work also expanded solidly, but at a softer pace during November.

“Survey respondents widely commented on improved demand and higher customer numbers. There were also reports that companies broadened their product offerings. At the same time, greater demand from US and Asian markets supported a tenth monthly uptick in exports,” IHS said.

Manufacturers were also upbeat about their growth prospects for the next 12 months. The degree of positivity moderated to the lowest since July but was still above the long-run series average.

But it’s not all good news. The PMI revealed further signs that manufacturing companies struggled to keep up with workloads during the month. Unfinished business increased at a survey-record pace which was largely linked to stretched supply chains and component shortages.

"Firms meanwhile continue to adopt advance buying strategies which have served them well so far. That said, companies struggled once again with shortages, resulting in a record accumulation of incomplete work,” said Shreeya Patel, economist at IHS Markit.

Average lead times from vendors lengthened to the second-greatest extent since the survey began in October 2010. Anecdotal evidence suggested that transportation delays, material scarcity, port congestion and virus-related restrictions had led to worsening vendor performance. In response, manufacturers sought to build their safety stocks during November, with the latest rise in pre[1]production inventories the joint second-steepest in the series history.

“Survey respondents commented on difficulties sourcing semiconductor chips and higher prices for steel, rubber, aluminium and electrical components. Firms opted to pass on part of the burden to customers by raising their selling charges. The rate of output price inflation moderated but was the fourth-steepest in the series history,” IHS commented.

Data for the PMI were collected 12-24 November 2021.

The IHS Markit Canada Manufacturing PMI is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 400 manufacturers. The panel is stratified by detailed sector and company workforce size, based on contributions to GDP.

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