IHS Markit Canada Manufacturing PMI®

Manufacturing downturn sustained in May

Key findings:

Business conditions decline for second month in a row

New orders fall at fastest rate in over three years

Input price inflation at 51-month low

LONDON–(BUSINESS WIRE)–Canada’s manufacturing sector saw operating conditions worsen again in
May. Production continued to contract amid the sharpest drop in new
orders since December 2015. More positively, employment saw a fractional
increase after a slight dip in April, whilst input price inflation eased
to its slowest rate in over four years.

The headline seasonally adjusted IHS Markit Canada Manufacturing
Purchasing Managers’ Index® (PMI®) dropped from 49.7 in April to 49.1 in
May, signalling a second successive monthly deterioration in business
conditions. The latest PMI reading was the lowest in nearly
three-and-a-half years, albeit still indicating only a slight downturn.

All components of the headline index, bar employment, had a downward
impact on the figure. Output contracted at the most marked rate since
the end of 2015. Panellists linked this to falling new orders and
subdued global trade conditions.

Correspondingly, total new manufacturing orders dropped for the third
month running and at the sharpest rate in this period. Firms noted
weaker demand in both domestic and foreign markets. Some firms also
cited a negative impact on sales from lower construction activity.

Manufacturers reacted by paring back input purchases for the third
consecutive month, albeit at a modest and relatively unchanged pace
since April. This led to a slight reduction in pre-production stock
levels, while inventories of finished goods were broadly stable.

Conversely, workforce numbers increased marginally in May, reversing the
mild drop last month. This was partly linked to expansion of factory
space, countering the drag from softer production levels.

Supply chain performance deteriorated at only a slight pace, registering
the smallest increase in delivery times for over three years. Some firms
noted a shortage of raw material supply leading to longer delays.

On the price front, Canadian manufacturing firms registered the weakest
inflation of input costs in over four years, and the joint-softest for
nearly six years. Despite this, panellists highlighted a number of price
rises, including fuel, resin and foodstuff charges. Tariffs from the US
also inflated cost burdens, which firms then passed on to customers
through a solid uptick in output charges.

Looking ahead, manufacturing companies remained upbeat regarding future
output. In fact, the level of optimism climbed to the highest in 13
months, despite the current slowdown in the sector. 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.

Meanwhile, latest data pointed to deteriorating business conditions
across all regions monitored by the survey. Ontario registered the
sharpest downturn in manufacturing performance during May, partly
reflecting a survey-record decline in new export sales.

COMMENT

Christian Buhagiar, President and CEO at SCMA, said: “The latest survey
points to the weakest overall manufacturing sector performance since
December 2015, mainly driven by sustained declines in both production
levels and new order intakes. Manufacturers commented on softer
underlying demand from domestic and export clients in May, which was
often linked to subdued global trade volumes. “On a more positive note,
employment numbers increased slightly during the latest survey period
and manufacturers indicated a rebound in their business expectations to
a 13-month high. The improvement in manufacturing sector optimism
reflected greater optimism in relation to domestic economic conditions,
as well as planned business investment in new production capacity and
hopes of a recovery in international trade conditions during the year
ahead.”

Methodology

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.

Survey responses are collected in the second half of each month and
indicate the direction of change compared to the previous month. A
diffusion index is calculated for each survey variable. The index is the
sum of the percentage of ‘higher’ responses and half the percentage of
‘unchanged’ responses. The indices vary between 0 and 100, with a
reading above 50 indicating an overall increase compared to the previous
month, and below 50 an overall decrease. The indices are then seasonally
adjusted.

The headline figure is the Purchasing Managers’ Index® (PMI). The PMI is
a weighted average of the following five indices: New Orders (30%),
Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and
Stocks of Purchases (10%). For the PMI calculation the Suppliers’
Delivery Times Index is inverted so that it moves in a comparable
direction to the other indices.

Underlying survey data are not revised after publication, but seasonal
adjustment factors may be revised from time to time as appropriate which
will affect the seasonally adjusted data series.

May 2019 data were collected 13-24 May 2019.

For further information on the PMI survey methodology, please contact [email protected].

About PMI

Purchasing Managers’ Index® (PMI®) surveys are now available for over 40
countries and also for key regions including the eurozone. They are the
most closely watched business surveys in the world, favoured by central
banks, financial markets and business decision makers for their ability
to provide up-to-date, accurate and often unique monthly indicators of
economic trends. To learn more go to ihsmarkit.com/products/pmi.html.

About IHS Markit

IHS Markit (Nasdaq: INFO) is a world leader in critical information,
analytics and solutions for the major industries and markets that drive
economies worldwide. The company delivers next-generation information,
analytics and solutions to customers in business, finance and
government, improving their operational efficiency and providing deep
insights that lead to well-informed, confident decisions. IHS Markit has
more than 50,000 business and government customers, including 80 percent
of the Fortune Global 500 and the world’s leading financial institutions.

IHS Markit is a registered trademark of IHS Markit Ltd. and/or its
affiliates. All other company and product names may be trademarks of
their respective owners © 2019 IHS Markit Ltd. All rights reserved.

About SCMA

The Supply Chain Management Association™ (SCMA™) is the voice of
Canada’s supply chain, representing and serving more than 7,000
professionals across the country, as well as the wider supply chain
community. SCMA is a federation, with a national secretariat and 10
provincial/territorial Institutes. Its mission is to “provide leadership
to the Canadian supply chain community, provide value to all members,
and advance the profession.” Through its education, advocacy and
resource-development initiatives, the association endeavours to advance
its vision, to see that “Canadian supply chain professionals and
organizations are recognized for leading innovation, global
competitiveness and driving economic growth.” Its Supply Chain
Management Professional (SCMP) designation is Canada’s most-sought-after
professional designation for those entering the field and advancing as
leaders in supply chain. www.scma.com

NOTE

The intellectual property rights to the Canada Manufacturing PMI™
provided herein are owned by or licensed to IHS Markit. Any unauthorised
use, including but not limited to copying, distributing, transmitting or
otherwise of any data appearing is not permitted without IHS Markit’s
prior consent. IHS Markit shall not have any liability, duty or
obligation for or relating to the content or information (“data”)
contained herein, any errors, inaccuracies, omissions or delays in the
data, or for any actions taken in reliance thereon. In no event shall
IHS Markit be liable for any special, incidental, or consequential
damages, arising out of the use of the data. Purchasing Managers’ Index®
and PMI™ are either registered trademarks of Markit Economics Limited or
licensed to Markit Economics Limited. IHS Markit is a registered
trademark of IHS Markit Ltd. and/or its affiliates. All other company
and product names may be trademarks of their respective owners © 2018
IHS Markit Ltd. All rights reserved.

Contacts

IHS Markit
Tim Moore
Associate Director
T:
+44-1491-461-067
[email protected]

Joanna
Vickers
Corporate Communications
T: +44-207-260-2234
[email protected]

SCMA
Lynne
Coles
416-542-3860
[email protected]

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