Market Overview

IHS Markit Canada Manufacturing PMI®


Weakest Improvement in Manufacturing Conditions for Almost Two Years
in December

Key findings:

  • Headline PMI eases to its lowest since January 2017
  • Softer rates of output and new order growth
  • Export sales stagnate at the end of 2018

Canadian manufacturers experienced a renewed slowdown in growth at the
end of 2018, with both production volumes and incoming new work
expanding at softer rates than in November. The pace of manufacturing
job creation also moderated in December, partly reflecting a drop in
business optimism to its weakest since February 2016.

At 53.6 in December, down from 54.9 in November, the headline seasonally
adjusted IHS Markit Canada Manufacturing Purchasing Managers' Index®
(PMI®) signalled the weakest improvement in overall business conditions
since January 2017.

A moderation in output growth to its slowest for two years was a key
factor weighing on the headline PMI in December. Survey respondents
commented on less favourable demand conditions, particularly in the
energy sector. There were also reports that global trade frictions had
held back export sales during the latest survey period.

New business volumes continued to rise in December, but at one of the
slowest rates seen over the past two years. This partly reflected a
stagnation in export sales.

Latest data indicated that new work from abroad was broadly unchanged in
December, which ended a 12 month period of sustained expansion. Some
firms noted a drag on export competitiveness from higher raw material
costs (particularly steel). There were also reports that export demand
from US clients had lost momentum.

Despite softer rates of output and new business growth, the latest
survey revealed an accelerated rise in unfinished work. Higher backlogs
of work have been recorded for three months running, driven by ongoing
capacity pressures.

Manufacturers continued to add to their workforce numbers in December,
but the rate of job creation slowed from the survey-record peak seen in
the previous month. Anecdotal evidence suggested that less upbeat
projections for output growth had acted as a brake on staff hiring at
some firms.

Business optimism moderated to its weakest for almost three years in
December. Reports from survey respondents indicated that concerns about
the domestic economic outlook had weighed on business expectations for
2019. Some manufacturers also noted that global trade tensions had the
potential to hold back growth in the next 121 months.

Meanwhile, input cost inflation eased to its lowest since August 2017.
Manufacturers noted that lower oil-related prices had helped to offset
pressure on costs from rising prices for metals. Factory gate charges
also increased at a slower pace in December. There was an alleviation of
pressure on supply chains at the end of 2018, with lead times for
manufacturing inputs lengthening to the least marked extent since April

Christian Buhagiar, President and CEO at SCMA, said:

"December data signalled a loss of momentum for manufacturers
at the end of the year, with stagnating export sales and softer energy
sector demand the key factors behind an overall slowdown in production
growth. Survey respondents also commented that global trade tensions has
led to greater risk aversion among clients. As a result, manufacturing
companies have curtailed their expectations for output growth in 2019,
with business optimism easing to its lowest for almost three years.

"Quebec was a notable outperformer in December as manufacturing
conditions improved at the fastest pace for four months. Meanwhile,
in Ontario saw softer overall growth than in November, while those based
in Alberta & British Columbia experienced the weakest upturn for just
over two years."


December data pointed to a renewed slowdown in production growth across
the Canadian manufacturing sector. The seasonally adjusted Output Index
has now dropped in three of the past four months, with the latest
reading signalling the weakest rate of expansion since December 2016.

A number of manufacturers cited softer demand from the energy sector,
alongside a headwind to growth from ongoing global trade tensions.

New Orders

The seasonally adjusted New Orders Index revealed a solid upturn in new
work at the end of 2018, but the rate of expansion continued to lose
momentum. Moreover, the latest reading was one of the lowest seen over
the past two years.

Survey respondents noted that less favourable demand conditions in both
domestic and export markets had held back new order growth in December.

New Export Orders

Manufacturers indicated that new export sales were broadly unchanged in
December, which ended a 12 month period of sustained expansion.

Anecdotal evidence cited weaker demand from clients in the US. Some
firms also reported a drag on export competitiveness from higher raw
material costs (particularly steel).

Backlogs of Work

Despite a softer rise in new business volumes, latest data signalled a
faster accumulation of unfinished work at manufacturing companies. The
seasonally adjusted Backlogs of Work Index pointed to the sharpest rate
of increase since August.

Panel members noted that supply chain disruptions had contributed to
higher levels of unfinished business at the end of the year.

Stocks of Finished Goods

Adjusted for seasonal influences, the Stocks of Finished Goods Index
dropped back below the 50.0 no-change value in December. The latest
reading was the lowest for three months and signalled a marginal
reduction in post-production inventories.

Manufacturers suggested that heightened uncertainty about the demand
outlook had led to more cautious inventory policies.


A relatively strong rate of job creation was maintained across the
manufacturing sector in December, although the seasonally adjusted
Employment Index eased from the survey-record high seen in the previous

Increased staffing levels were widely linked to new product launches and
long-term investment in additional plant capacity.

Quantity of Purchases

Growth of purchasing activity rebounded slightly from the 11 month low
seen during November. However, the seasonally adjusted Quantity of
Purchases Index continued to signal a subdued expansion of input buying
in comparison to the trend seen in the first half of 2018.

Some survey respondents noted that reduced supply chain pressures had
lessened the need to build up safety stocks in December.

Suppliers' Delivery Times

The seasonally adjusted Suppliers' Delivery Times Index remained well
below the 50.0 no-change value in December, thereby signalling a
sustained deterioration in vendor performance.

However, the latest reading picked up since November and signalled the
least marked lengthening of suppliers' delivery times for just over
one-and-a-half years.

Stocks of Purchases

Stocks of purchases continued rise in the manufacturing sector during

The latest index reading was nonetheless the lowest since April and
signalled only a modest accumulation of pre-production inventories.

Input Prices

The seasonally adjusted Input Prices Index pointed to another slowdown
in cost pressures at manufacturing companies in December, with the rate
of inflation the weakest seen since August 2017.

Where a rise in input prices was reported, survey respondents mainly
cited greater steel costs. There were reports that lower prices for
oil-related inputs had helped to moderate the overall rate of cost
inflation in December.

Output Prices

Factory gate price inflation slowed for the second month running and
reached its lowest point since March, according to the seasonally
adjusted Output Prices Index.

Softer rises in average prices charged were widely linked to competitive
pressures and weaker input cost inflation during December.

Future Output

Business expectations regarding the year ahead outlook for manufacturing
production continued to moderate in December. The balance of firms
forecasting an expansion in their output volumes was the least positive
seen since February 2016.

Manufacturers noted that greater concern about the domestic economic
outlook had weighed on their growth projections for 2019.


The intellectual property rights to the 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 trademarks of Markit Economics Limited or
licensed to Markit Economics Limited. 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.

View Comments and Join the Discussion!
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at