Manufacturing Grows at Fastest Pace in 2.5 Years

October was a great month for manufacturing in Canada

Written by Advisor Staff

October was a good month for Canada’s manufacturing sector as it grew at the fastest pace for two-and-a-half years, finds the RBC Canadian Manufacturing Purchasing Managers’ Index.

After adjusting for seasonal variation, the RBC Canadian Manufacturing Purchasing Managers’ Index (PMI)—a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector—rose to 55.6, up from 54.2 in September and above the average of 53.3.

The RBC PMI indicates both output and new orders increased at the strongest rates since April 2011. Manufacturers generally attributed October’s performance to greater client demand. Overall, total incoming new work rose strongly over the month, and at the second-strongest pace since data collection began in October 2010.

Manufacturers also bought more inputs in October, with the latest rise in buying activity the strongest since September 2011. Some of the increase was held back in stock, with input inventories rising modestly over the month. Meanwhile, suppliers’ delivery times lengthened further in the latest survey period, as vendors were generally busier. The latest increase in lead times was the greatest for 16 months.

Prices for raw materials like steel and packaging, as well as fuel, also went up. Companies passed on those costs to buyers—average selling prices rose at the strongest pace since August 2011.

To match demand, firms raised production for the sixth consecutive month in October. Nonetheless, backlogs of work increased for the second month running, while stocks of finished goods depleted only slightly.

Manufacturers also hired more staff last month, though not at the rate hired in September. Approximately 16% of surveyed firms hired additional staff over the month, often linking this to higher new order volumes. Employment in Canada’s manufacturing sector rose for the 21st successive month in October.

Meanwhile, inflationary pressures strengthened, with the latest rise in input costs the greatest since March.

Regional highlights:

  • Alberta and British Columbia continued to post the strongest improvement in manufacturing business conditions in October.
  • New order growth accelerated across most Canadian regions, with the exception of Quebec where it eased very slightly.
  • The strongest rate of job creation was recorded for Alberta and British Columbia.
  • The weakest rate of input price inflation was posted in Ontario.

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