Sharp decline for business conditions: RBC PMI

The latest RBC Canadian Manufacturing PMI survey pointed to another downturn in overall business conditions. That’s due to a decline in output, new orders and employment.

Also, new export sales dropped for the first time since April, with survey respondents noting that weaker global economic conditions had weighed on new business volumes.

Meanwhile, input costs rose at a sharp and accelerated pace in October, which placed pressure on operating margins and contributed to a further slight increase in factory gate charges.

Read: Global upheaval to continue into 2016

Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI posted 48 in October, which is down from 48.6 in September and below the neutral 50 threshold for the third month in a row. Click here for historical data.

“Heightened global economic uncertainty and ongoing energy price weakness continues to weigh on the Canadian manufacturing sector, as indicated by October’s record-low reading of 48,” said Craig Wright, senior vice-president and chief economist for RBC. But, he notes, “As we move toward the end of the year, we expect that a strengthening U.S. economy and weaker Canadian dollar will fuel demand for Canada’s exports, resulting in a shift to positive growth territory.”

Read: U.S. economy rebounding after rough summer

Below are key findings from the October survey.

• This is the sharpest deterioration in business conditions since the survey began in October 2010
• Production levels fell at a steeper rate in October, despite softer decline in new orders; and
• Manufacturing employment numbers decreased for the fourth consecutive month.

And, regional highlights include:

• Alberta and British Columbia remained by far the worst performing region in October;
• Quebec experienced a renewed deterioration in manufacturing sector performance;
• Ontario and the rest of Canada continued to record an overall upturn in manufacturing conditions; and
• manufacturers in all regions reported a sharp and accelerated rise in their average input costs.

Read: Why Canada is falling behind

“The lack of spending by Canada’s oil and gas sector, and weak economic conditions abroad, made October a very tough month for Canada’s manufacturing sector,” says Cheryl Paradowski, president and chief executive officer of SCMA. “October saw the sharpest fall in manufacturing production in at least five years, and the overall performance of the sector has dropped to yet another record low.

“This latest fall in production was made worse by manufacturers cutting into their inventories, as the fall in new orders from Canadian manufacturers has leveled off since September. [But], despite these challenges, we see evidence that employers have tried to limit job cuts as much as possible through initiatives like work-share arrangements, and want to retain their staff in anticipation of future growth.”

Read the full report.

Staff

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