Canadian Manufacturing Still Competitive

The sector's rate of expansion drops to lowest point in 2012, says RBC, but is still doing better than other countries

Written by Advisor Staff

Canada’s manufacturing sector grew only modestly in October, with the rate of expansion dropping to the weakest it’s been since January, says the RBC Canadian Manufacturing Purchasing Managers’ Index.

The index pointed to only modest increases in both output and new orders during October. In particular, the rate of total new order growth slowed over the month, posting the weakest expansion since January, despite a stronger rise in new export orders.

Meanwhile, input prices continued to increase solidly while the rate of inflation remained weaker than the series average.

“Canadian manufacturing continued to weaken in October, though the PMI measure is still indicative of growth in the sector in contrast to flat to declining activity in most other countries,” says Craig Wright, senior vice-president and chief economist at RBC.

He adds, “This weakening may in part be related to continuing uncertainty around how fiscal imbalances in the U.S. and the Euro area will be resolved. Greater strength in the Canadian manufacturing sector may hinge on some of this uncertainty easing as policy measures outside of Canada are implemented.”

Employment in Canada’s manufacturing sector continued to increase in October, with one-in-five surveyed firms hiring additional staff. Greater workloads prompted companies to hire additional employees numbers, but the rate of job creation was modest overall.

Firms reported that a wide range of raw materials had increased in price in October, with resin, fuel and oil-related products particularly highlighted. That said, the rate of input price inflation slowed and remained relatively weak. The rate of increase for output charges also eased over the month, with average selling prices rising only modestly from September numbers.

“The latest data indicates a stronger expansion of new foreign orders, suggesting that soft domestic demand was offset by greater demand in key export markets such as the U.S.,” says Cheryl Paradowski, president and CEO of PMAC.

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