Modest growth for manufacturing in Canada: PMI Click image to enlarge

Canadian manufacturers signalled an improvement in their overall business conditions during November, which marked three months of sustained recovery, according to data from the IHS Markit Canada Manufacturing PMI.

While a positive development, the degree of growth remained modest.

"The manufacturing sector has started to find its feet again after a soft patch during the third quarter of the year," says Tim Moore, economics associate director at IHS Markit.

"November data reveals another modest recovery in manufacturing performance, led by faster growth among consumer goods producers. New orders and production volumes have now risen in tandem for three months running. However, underlying growth momentum remains lacklustre in comparison to historic trends and this continues to hold back job creation as well as near-term business optimism.

"Lower export sales were the main source of concern in November, especially within the investment goods category. That said, Canadian manufacturers often noted that they expect improving US demand and a reduction in global trade frictions to help deliver a turnaround in export demand."

Mirroring the trend for overall manufacturing performance, growth in production was the fastest for nine months in November. Survey respondents often noted that rising domestic demand had led to greater output requirements. By sub-category, the strongest pace of expansion was reported by consumer goods producers, while investment goods once again signalled the weakest output trend.

The modest performance was due in part to falling export sales that acted as a headwind to manufacturing performance during the latest survey period.

Business optimism regarding the year ahead outlook also dipped in November, with this index reaching its joint-lowest level since February 2016. The headline seasonally adjusted PMI posted 51.4 in November, up slightly from 51.2 in the previous month and the highest reading since February. The modest improvement in business conditions was underpinned by continued increases in output, new orders and employment.

There were signs that manufacturing capacity remained sufficient to meet both new and existing orders. This was signalled by a reduction in backlogs of work for the ninth month in a row during November.

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