Despite the downturn in business conditions, manufacturers remain upbeat regarding future output, according to the latest IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI). .
In fact, the level of optimism climbed to the highest in 13 months. Firms noted that a number of factors aided their positive expectations, such as new products, hiring plans and factory expansion, while also citing signs of a turnaround in the wider economy.
Workforce numbers increased slightly in May, reversing last month’s mild drop. This increase was partly linked to expansion of factory space, countering the drag from softer production levels.
The headline seasonally adjusted PMI dropped from 49.7 in April to 49.1 in May, signalling a second successive monthly deterioration in business conditions. Production continued to contract amid the sharpest drop in new orders since December 2015.
Canadian manufacturing firms registered the weakest inflation of input costs in over four years. Despite this, panellists highlighted a number of price rises, including fuel, resin and foodstuff charges. Tariffs from the U.S. also raised costs, which firms passed on to customers through higher output charges.