Manufacturing business conditions deteriorate

The RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI) fell below the 50.0 no-change mark that separates growth from contraction in March. This was the first sub-50 reading in the two-and-a-half year survey history. At 49.3, down from 51.7 in February, the RBC PMI was consistent with a marginal rate of contraction in March.

Read: Mid-sized firms buckling under economic pressure

Both the levels of output and new orders were lower in March compared with February. A number of firms linked this to weak client demand. The reduced workloads also contributed to a slower rate of job creation. Meanwhile, on the price front, the rate of input cost inflation was strong and faster than in February, but remained slower than the series average.

Read: Manufacturing index signals January growth “The deterioration in the Canadian manufacturing measure is surprising in the face of improving growth in both the U.S. and various emerging economies,” says Craig Wright, senior vice president and chief economist, RBC.

Read: Gains in housing, manufacturing propel U.S. economy

He adds, “Uncertainty about resolving fiscal imbalances in the U.S. — with sequestration going ahead March 1 — and in the Euro-area may have weighed on sentiment. This weak spot should be short-lived, as we expect global demand for Canadian exports will recover.”

Regional highlights include:

• Three regions saw deterioration in manufacturing business conditions. The rates of contraction were moderate in both Alberta and British Columbia and Ontario, but marginal in Quebec;
• Production fell at the sharpest rate in Alberta and British Columbia;
• The strongest rate of contraction in new orders was recorded in Ontario;
• Job losses were reported in Alberta and British Columbia, but employment growth was recorded elsewhere.

Staff

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