The latest IHS Markit Canada Purchasing Managers’ Index (PMI), released at the beginning of this month, indicates that 2018 is off to a strong start for Canadian manufacturing.
Underpinning the optimism are faster rises in output volumes, new business intakes and staff recruitment. There were also signs that the resurgence in production schedules would continue in the months ahead, with incomplete workloads (backlogs) accumulating at the fastest pace since the survey began in October 2010. Improved demand conditions and sharp input cost inflation meanwhile led to the largest increase in factory gate prices for almost seven years.
The seasonally adjusted PMI picked up to 55.9 in January from 54.7 in December, remaining well above the 50.0 no-change threshold. Moreover, the latest PMI reading signalled the joint-strongest improvement in business conditions since April 2011.
Production volumes have now increased for fifteen months running, with the rate of expansion accelerating to its fastest since July 2017. A robust rise in manufacturing output was driven by greater demand from both domestic and export clients at their start of the year. Survey respondents commented on more favourable economic conditions and increased spending by US clients in particular.
There were signs that production schedules struggled to keep up with rising order intakes during January. This was reflected in a solid accumulation of incomplete workloads, with the latest rise in backlogs the fastest for over seven years. At the same time, stronger than expected sales contributed to a further reduction in stocks of finished goods across the manufacturing sector at the start of 2018.
Manufacturers responded to pressures on capacity by increasing their staffing numbers at the steepest pace since last August. Input buying also strengthened in January, driven by improved demand and efforts to rebuild warehouse inventories. Increased stocks of purchases have now been recorded for three months running.
Source: IHS Markit