The pace of growth in the Canadian manufacturing sector picked up to its best level in eight months in July as gauges of new orders and employment improved, according to new data from RBC.
The RBC Canadian Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 54.3 last month from 53.5 in June. It was the highest level since last November.
“Canada’s manufacturers kicked off the second half of 2014 on stronger footing, clearly benefiting from improving global economic activity – it’s encouraging to see the momentum,” said Paul Ferley, assistant chief economist at RBC. “With the U.S. economy pushing ahead, we expect this trend to continue.”
Key findings from the July survey include the sharpest improvement in business conditions since November 2013, a pick up in output and new orders growth, and an increase in staffing levels for the sixth successive month. Regionally, Quebec continued to register the strongest upturn in overall business conditions; all four regions signaled an increase in manufacturing employment levels, led by Quebec and Ontario, and new export orders rose in all four regions monitored by the survey.
“Increased demand patterns contributed to an increase in backlogs of work across the manufacturing sector for the sixth consecutive month in July,” RBC said. “The current period of rising volumes of unfinished work is the longest recorded by the survey for three years, which in turn supported further manufacturing job creation.”
The latest data also pointed to a solid rise in payroll numbers with the rate of employment growth reaching its strongest since September 2013. “July data indicated that manufacturers continued to boost their volumes of input buying during July, and the latest expansion of purchasing activity was the steepest recorded in 2014 to date,” RBC said. “Despite a solid increase in input buying, pre-production inventory volumes dipped for the third month running.”
Meanwhile, stocks of finished goods also decreased in July. “The latest reduction in post-production inventories was the sharpest for 12 months, with some firms citing stronger than expected sales at their plants,” RBC said.