Canadian manufacturing growth rose in February to its highest level since November 2014, a new report said, with an increase in new orders and employment suggesting a rebound in business confidence two years after the oil price shock hit the economy.
The Markit Canada Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 54.7 last month from 53.5 in January. A reading above 50 shows growth in the sector.
“Faster rates of output and new business growth were the main factors boosting the headline PMI in February,” the report said. “In both cases, the rate of expansion was the steepest since late-2014. Survey respondents noted that greater demand from domestic markets, especially the energy sector, had underpinned the improvement in manufacturing growth. There were also reports that the upturn in new order intakes had been supported by customers’ efforts to replenish inventories. Meanwhile, export sales growth remained subdued, and therefore provided only a marginal contribution to overall new business gains in February.”
The measure of employment rose to 54.3 from 52.2 with staffing levels rising in all regions on the country, led by British Columbia and oil-sensitive Alberta. Two years after the collapse in crude prices hit the Canadian economy, policymakers believe the worst is past.
While input prices edged down to 61.3 from 61.5, the index remained near a 31-month high, with manufacturers citing the rising cost of raw materials
“Across the Canadian manufacturing sector as a whole, business optimism about the 12-month outlook reached its highest level since early-2014; this contributed to renewed inventory building and the steepest rise in payroll numbers for over two years in February,” said Tim Moore, senior economist at IHS Markit, which compiled the survey. “Stronger demand for inputs continued to exert pressure on manufacturing supply chains, with delivery times lengthening amid widespread reports of depleted stocks among vendors. Against a backdrop of rising global commodity prices, this placed upward pressure on raw material costs and meant that the overall pace of cost inflation remained close to its strongest for two-and-a-half years.”
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