Manufacturing PMI signals fastest growth since December 2014

Canadian manufacturers reported a strong start to 2017, with business conditions improving at the fastest pace for more than two years.

The upturn reflected higher output rates and new order growth in January, alongside a sustained rise in staffing levels. Looking ahead, around 41 per cent of the survey panel anticipate an increase in production volumes over the next 12 months, while only 6 per cent forecast a reduction.

The seasonally adjusted Markit Canada Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.5 in January, up from 51.8 in December and above the neutral 50.0 threshold for the 11th consecutive month. Moreover, the headline PMI pointed to the strongest upturn in operating conditions for just over two years.

A robust and accelerated expansion of overall production volumes was the key factor boosting the manufacturing sector in January. Higher levels of output have been recorded in each of the past three months, with the latest rise the strongest since December 2014. Survey respondents commented on efforts to boost production in response to greater client demand. Some firms also noted that output growth had been helped by a reduced desire to streamline inventories.

January data signalled the sharpest upturn in new order volumes for just over two years, which largely reflected stronger demand from domestic sources. A number of manufacturers cited rising sales to energy sector clients in particular.

Meanwhile, new export orders picked up at only a moderate pace, although the rate of expansion was the most marked seen since March 2016.

Higher levels of incoming new work contributed to another increase in staffing numbers across the manufacturing sector in January. The latest survey indicated that the rate of job creation was the fastest since last July, which was linked to greater production requirements and improved confidence towards the business outlook. Despite efforts to boost payroll numbers, manufacturers reported a rise in backlogs of work for the first time in three months during January.

Regional highlights:

  • Manufacturing growth was the strongest for over three years in both Alberta and British Columbia.
  • Business conditions deteriorated again in Quebec, partly reflecting weaker export sales.
  • All regions reported a marked deterioration in supplier performance at the start of 2017.

The Markit Canada Manufacturing PMI Report is based on data compiled from monthly replies to questionnaires sent to purchasing executives in more than 400 industrial companies.