Record high growth for manufacturingClick image to enlarge

The manufacturing sector hit record-high levels in June, according to the latest data from the IHS Markit Canada Manufacturing Purchasing Managers' Index (PMI), registering 57.1, up from 56.2 in May and the highest reading in  more than seven and a half years of data collection.

June data signalled a robust and accelerated improvement in overall business conditions across the Canadian manufacturing sector. Another strong rise in new work helped to boost production volumes and stimulate additional staff hiring in June.

Stronger output growth, improved sales volumes and a survey record pace of inventory building were key factors behind the elevated PMI reading in June. Manufacturers reported the fastest rise in production levels for five months in June, which was linked to increased capacity and rising workloads. Meanwhile, new work expanded at the strongest pace since November 2013. Survey respondents widely commented on greater demand from both domestic and export markets (particularly the US).

“Canadian manufacturers achieved their strongest expansion of sales volumes for over four-and-a-half years in June. Improved domestic orders helped to offset a slight slowdown in export growth from its recent peak," says Tim Moore, associate director, IHS Markit.

“Survey respondents commented on a general upswing in customer demand and ongoing efforts to boost production capacity. Manufacturers also suggested that part of the rise in new work reflected efforts by clients to complete orders and boost their inventories in advance of surcharges on steel and aluminium.

“Another robust influx of new work, alongside intense supply chain pressures, led to the sharpest accumulation of unfinished business for at least seven-and-a-half years. Manufacturers continued to build up safety stocks of inputs in response to worsening raw material availability, with the latest data pointing to a survey-record upturn in warehouse inventories,” notes Moore.

Manufacturers are upbeat about their growth prospects for the next 12 months, but the degree of optimism eased to its lowest since March. Despite a robust pace of job creation in June, some firms noted that capacity constraints were likely to act as a brake on production growth at their plants.

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