Market Overview

IHS Markit Canada Manufacturing PMI™

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Sharpest rise in manufacturing output since December 2010

Key findings:

  • Production volumes increase at robust pace in August...
  • ...but new order growth eases to four-month low
  • Strongest input cost inflation for almost seven-and-a-half years

Data collected August 13-24

August data pointed to a sharp and accelerated upturn in Canadian
manufacturing output, but the latest survey also revealed a loss of
momentum for new business growth. Anecdotal evidence suggested that some
clients had adopted a wait-and-see approach to spending in response to
heightened business uncertainty and ongoing global trade tensions.

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IHS Markit Canada Manufacturing Output Index (Sources: IHS Markit, StatCan)

IHS Markit Canada Manufacturing Output Index (Sources: IHS Markit, StatCan)

Steel and aluminum tariffs contributed to the fastest rise in
manufacturers' input costs since April 2011. At the same time, factory
gate charges increased at one of the sharpest rates since the survey
began in 2010.

The seasonally adjusted IHS Markit Canada Manufacturing Purchasing
Managers' Index
® (PMI™) dropped
fractionally to 56.8 in August, from 56.9 in July, to signal the weakest
overall improvement in business conditions since May. Slower new
business growth was the main factor weighing on the headline index in
August. Nonetheless, the latest reading remained well above the long-run
survey average (53.0).

Production volumes increased at a robust pace in August, with the rate
of expansion the sharpest since December 2010. Manufacturers commented
on increased workloads and successful efforts to boost operating
capacity at their plants.

New order growth eased to a four-month low, despite a slightly stronger
contribution from export sales. The latest rise in new work from abroad
was the greatest since May, partly driven by rising demand from clients
operating in the energy sector. However, there were also reports that
U.S. trade tariffs had dented competitiveness during the latest survey
period.

Concerns about the outlook for export sales acted to dampen business
confidence in August. Reflecting this, manufacturers indicated that
their output growth expectations had slipped to a five-month low.
Despite reporting more subdued growth prospects for the year ahead,
latest data indicated a robust and accelerated rise in payroll numbers
across the manufacturing sector.

Meanwhile, manufacturing firms continued to boost their stocks of inputs
during August, which reflected pre-purchasing of metals ahead of trade
tariffs, alongside efforts to mitigate against supply chain delays. The
overall increase in pre-production inventories was the sharpest recorded
since the survey began in October 2010.

Strong demand for raw materials contributed to greater input cost
pressures and the second-largest lengthening of suppliers' lead-times in
the survey history. The latest increase in overall cost burdens was the
steepest for almost seven-and-a-half years. At the same time, the
introduction of trade tariffs on steel and aluminum resulted in another
strong increase in average prices charged by manufacturers in August.

Regional highlights:

  • Quebec remained the best-performing region monitored by the survey in
    August
  • Manufacturers in Alberta & BC and Quebec experienced a relatively
    strong rate of new export order growth
  • Ontario was the weakest-performing area in terms of new work from
    abroad
  • All regions recorded sharp increases in their average cost burdens
    during August

Comment:

Christian Buhagiar, President and CEO, SCMA

"Canadian manufacturers continued to boost their production volumes
in August, with the latest upturn the fastest since the end of 2010.
However, a slowdown in new business growth meant that the headline PMI
dipped to a three-month low.

"The latest survey highlighted that steel and aluminum tariffs pushed
up input costs and acted as a headwind to export sales in U.S. markets.
The rate of input price inflation was the steepest for almost
seven-and-a-half years, which underpinned another strong increase in
average prices charged by manufacturing companies."

Note to Editors:

The IHS Markit Canada Manufacturing PMI™ Report is based on data
compiled from monthly replies to questionnaires sent to purchasing
executives in over 400 industrial companies. The panel is stratified by
company workforce size and by Standard Industrial Classification (SIC)
group, based on industry contribution to Canada GDP.

Survey responses reflect the change, if any, in the current month
compared to the previous month based on data collected mid-month. For
each of the indicators the ‘Report' shows the percentage reporting each
response, the net difference between the number of higher/better
responses and lower/worse responses, and the ‘diffusion' index. This
index is the sum of the positive responses plus a half of those
responding ‘the same'.

Diffusion indexes have the properties of leading indicators and are
convenient summary measures showing the prevailing direction of change.
An index reading above 50 indicates an overall increase in that
variable, below 50 an overall decrease. The IHS Markit Canada
Manufacturing Purchasing Managers' Index® (PMI™) is a
composite index based on five of the individual indexes with the
following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2,
Suppliers' Delivery Times - 0.15, Stock of Items Purchased - 0.1, with
the Delivery Times Index inverted so that it moves in a comparable
direction.

The Purchasing Managers' Index (PMI) survey methodology has developed an
outstanding reputation for providing the most up-to-date possible
indication of what is really happening in the private sector economy by
tracking variables such as sales, employment, inventories and prices.
The indices are widely used by businesses, governments and economic
analysts in financial institutions to help better understand business
conditions and guide corporate and investment strategy. In particular,
central banks in many countries (including the European Central Bank)
use the data to help make interest rate decisions. PMI surveys are the
first indicators of economic conditions published each month and are
therefore available well ahead of comparable data produced by government
bodies.

IHS Markit does not revise underlying survey data after first
publication, but seasonal adjustment factors may be revised from time to
time as appropriate which will affect the seasonally adjusted data
series. Historical data relating to the underlying (unadjusted) numbers,
first published seasonally adjusted series and subsequently revised data
are available to subscribers from IHS Markit. Please contact economics@ihsmarkit.com.

About Supply Chain Management Association

The Supply Chain Management Association (SCMA) is Canada's largest
association for supply chain management professionals. We represent
7,500 members as well as the wider profession working in roles that
cover sourcing, procurement, logistics, inventory, and contract
management. SCMA sets the standards for excellence and ethics, and is
the principal source of professional development and accreditation in
supply chain management in Canada. www.scma.com.

About IHS Markit (www.ihsmarkit.com)

IHS Markit (NASDAQ:INFO) is a world leader in critical information,
analytics and solutions for the major industries and markets that drive
economies worldwide. The company delivers next-generation information,
analytics and solutions to customers in business, finance and
government, improving their operational efficiency and providing deep
insights that lead to well-informed, confident decisions. IHS Markit has
more than 50,000 business and government customers, including 80 percent
of the Fortune Global 500 and the world's leading financial institutions.

IHS Markit is a registered trademark of IHS Markit Ltd and/or its
affiliates. All other company and product names may be trademarks of
their respective owners © 2018 IHS Markit Ltd. All rights reserved.

About PMI

Purchasing Managers' Index® (PMI™) surveys are now available
for over 40 countries and also for key regions including the eurozone.
They are the most closely-watched business surveys in the world,
favoured by central banks, financial markets and business decision
makers for their ability to provide up-to-date, accurate and often
unique monthly indicators of economic trends. To learn more go to www.ihsmarkit.com/product/pmi.

The intellectual property rights to the IHS Markit Canada
Manufacturing PMI™ provided herein are owned by or licensed to IHS
Markit. Any unauthorised use, including but not limited to copying,
distributing, transmitting or otherwise of any data appearing is not
permitted without IHS Markit's prior consent. IHS Markit shall not have
any liability, duty or obligation for or relating to the content or
information ("data") contained herein, any errors, inaccuracies,
omissions or delays in the data, or for any actions taken in reliance
thereon.
In no event shall IHS Markit be liable for any special,
incidental, or consequential damages, arising out of the use of the
data. Purchasing Managers' Index
® and PMI™ are either
registered trade marks of Markit Economics Limited or licensed to Markit
Economics Limited. IHS Markit is a registered trademark of IHS Markit
Ltd and/or its affiliates.

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