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Sharpest rise in production volumes since February in Canada

Christian Fernsby |

KEY POINTS
  • The latest reading was the highest since February, but signalled only a marginal improvement in overall operating conditions
  • The latest expansion of production volumes was the strongest for eight months
  • Manufacturers commented on a gradual recovery in client demand especially in domestic markets

October data signalled a modest improvement in business conditions across the Canadian manufacturing sector, driven a sustained rebound in output and new business levels.

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Topics: CANADA   

At 51.2 in October, up from 51.0 in September, the seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) posted above the crucial 50.0 nochange value for the second month running.

The latest reading was the highest since February, but signalled only a marginal improvement in overall operating conditions.

Faster rates of output and new order growth boosted the headline PMI in October, more than offsetting a slightly weaker contribution from the employment component.

The latest expansion of production volumes was the strongest for eight months, albeit still softer than the long-run survey average.

Manufacturers commented on a gradual recovery in client demand, especially in domestic markets.

At the same time, goods producers noted that subdued global trade conditions remained a drag on growth.

Total new work increased for the second month running during October.

In contrast, latest data revealed a renewed drop in export sales, which survey respondents often attributed to intense competitive pressures.

Employment numbers rose again in October, but the rate of expansion was only marginal and softer than in the previous month.

Some manufacturers suggested that a lack of new work to replace completed projects had constrained staff recruitment at their plants.

A marked decline in backlogs of work during October also pointed to a lack of pressure on business capacity.

Manufacturers remained cautious in terms of their input buying during the latest survey period.

Softer demand for raw materials helped to alleviate some of the strain on suppliers, with vendor lead-times lengthening only slightly in October.

Latest data signalled a marginal accumulation of preproduction inventories across the manufacturing sector.

In contrast, stocks of finished goods were depleted for the first time in three months.

A number of survey respondents commented on efforts to boost cash flow by streamlining their post-production inventories.

Meanwhile, input cost inflation accelerated from the sevenyear low seen during September.

Manufacturers often commented on higher commodity prices in the latest survey period.

Factory gate charges nonetheless increased only slightly, with some firms noting that subdued business conditions had held back their pricing power.

Looking ahead, manufacturers in Canada are optimistic overall about their prospects for growth during the next 12 months.

The degree of positive sentiment picked up to its highest since July.

This was linked to new product launches and, in some cases, hopes of an improvement in global trade conditions. â– 


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