Canada's manufacturing sector records strongest expansion in five months, though the pace remains modest: RBC PMI™

Canada's manufacturing sector records strongest expansion in five months, though the pace remains modest: RBC PMI™

TORONTO, March 1, 2013 /CNW/ - The February RBC Canadian Manufacturing Purchasing Managers' Index™ (RBC PMI™) pointed to the strongest expansion in Canada's manufacturing sector since last September, although the rate of growth was only modest. A monthly survey, conducted in association with Markit, a leading global financial information services company, and the Purchasing Management Association of Canada (PMAC), the RBC PMI offers a comprehensive and early indicator of trends in the Canadian manufacturing sector.

The headline RBC PMI - a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector - indicated a modest improvement in Canadian manufacturing business conditions in February. However, at 51.7, the RBC PMI remained below the series average (53.6), despite having risen from the near survey-low of 50.5 in January.

The RBC PMI found that both output and new orders increased in February, partly reflecting greater demand and new client wins. The rates of growth were stronger than in January, but weaker than their respective series averages. Higher volumes of new work encouraged manufacturers to hire additional staff, with the rate of job creation at a four-month high. Meanwhile, the rate of input cost inflation slowed to a seven-month low and was modest in the context of historical data.

"The Canadian manufacturing sector fended off the February blahs with strengthening output and employment growth," said Craig Wright, senior vice-president and chief economist, RBC. "Greater demand from United States, Japan and China played a key role in boosting new export work which helped nudge output growth to the fastest pace of growth in the past six months. While it would be premature to suggest that the global economy is treading on a much brighter path, these modest improvements hint that better days may lie ahead."

The headline RBC PMI reflects changes in output, new orders, employment, inventories, prices and supplier delivery times.

Key findings from the February survey include:

    --  RBC PMI at highest level since last September;
    --  faster rates of output and new order growth, but both below
        respective series averages; and
    --  input price inflation weakest in seven months.

The volume of new orders received by Canadian manufacturers increased for the 
third month running in February. Firms generally commented on new client wins, 
although greater global demand, particularly in the United States, Japan and 
China acted to boost new export work. Overall, the rise in total new orders 
was moderate and the strongest since last September.

Reflective of increased new orders, companies raised production in the latest 
survey period. Output growth was the fastest in six months, but weaker than 
the series average. Stocks of finished goods were meanwhile depleted for the 
second month running, and backlogs of work also fell further, although at the 
slowest rate in five months.

Manufacturing employment increased in February, with over 14 per cent of 
surveyed firms hiring additional staff since January. Although a number of 
panellists linked job creation to the increase in new work, other respondents 
cited improved business confidence. Overall, the rate of employment growth 
quickened from January's one-year low to a four-month high.

The quantity of inputs bought by manufacturers was unchanged since January, 
while stocks of purchases were reduced for the fourth consecutive month in 
February. Concurrently, the latest lengthening of suppliers' delivery times 
was to the greatest extent in seven months, with a number of panellists 
commenting that vendors experienced transportation problems relating to the 
recent heavy snowfall.

Although input costs faced by Canadian manufacturing companies continued to 
increase in February, the rate of inflation was the weakest since July 2012 
and modest in the context of historical data. Firms particularly mentioned raw 
materials such as metals, chemicals and resin as having increased in price 
over the month.

Output charges also rose in February, as higher costs were generally passed on 
to clients. Although the rise in selling prices was the greatest in ten 
months, it was weaker than the series average.

Regional highlights include:
    --  All four regions saw an improvement in manufacturing business
        conditions in February. That said, the rates of growth were
        only marginal in both Ontario and Quebec.
    --  Manufacturers based in Ontario reported a slight reduction in
        output, while production increased elsewhere.
    --  Incoming new work fell in both Quebec and Ontario.
    --  Strongest rate of input price inflation recorded in Alberta and
        British Columbia.

"Growth in the Canadian manufacturing sector gained momentum in February and, 
with panellists expressing an optimistic business outlook, this expansion may 
continue to strengthen in the coming months" said Cheryl Paradowski, president 
and chief executive officer, PMAC. "At the moment, however, growth remained 
below par, with both output and new orders increasing only modestly over the 
month."

The report is available at www.rbc.com/newsroom/pmi

Notes to Editors:

The RBC Canadian 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 geographically and by Standard 
Industrial Classification (SIC) group, based on industry contribution to 
Canadian 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 RBC Canadian Manufacturing Purchasing Managers' Index™ (RBC 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.

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 Markit. Please contact economics@markit.com.

About RBC
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under 
the master brand name RBC. We are Canada's largest bank as measured by assets 
and market capitalization, and are among the largest banks in the world, based 
on market capitalization. We are one of North America's leading diversified 
financial services companies, and provide personal and commercial banking, 
wealth management services, insurance, corporate and investment banking and 
investor services and wholesale banking on a global basis. We employ 
approximately 80,000 full- and part-time employees who serve more than 15 
million personal, business, public sector and institutional clients through 
offices in Canada, the U.S. and 49 other countries. For more information, 
please visit rbc.com.

RBC supports a broad range of community initiatives through donations, 
sponsorships and employee volunteer activities. In 2012, we contributed more 
than $95 million to causes worldwide, including donations and community 
investments of more than $64 million and $31 million in sponsorships.

About Purchasing Management Association of Canada
The Purchasing Management Association of Canada (PMAC) is the leading, and the 
largest, association in Canada for supply chain management professionals. With 
7,000 members working across private and public sectors, PMAC is the principal 
source of supply chain training, education and professional development in the 
country, requiring all members to adhere to a Code of Ethics. Through its 10 
Provincial and Territorial Institutes, PMAC grants the SCMP (Supply Chain 
Management Professional) designation, the highest achievement in the field and 
the mark of strategic leadership. For more information please see www.pmac.ca.

About Markit
Markit is a leading, global financial information services company with over 
2,800 employees. The company provides independent data, valuations and trade 
processing across all asset classes in order to enhance transparency, reduce 
risk and improve operational efficiency. Its client base includes the most 
significant institutional participants in the financial marketplace. For more 
information, see www.markit.com.

About PMIs
Purchasing Managers' Index™ (PMI™) surveys are now available for 32 
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.markit.com/economics.

The intellectual property rights to the RBC Canadian Manufacturing PMI 
provided herein is owned by Markit Economics Limited. Any unauthorised use, 
including but not limited to copying, distributing, transmitting or otherwise 
of any data appearing is not permitted without Markit's prior consent. 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 Markit be liable for any special, incidental, or 
consequential damages, arising out of the use of the data. Purchasing 
Managers' Index™ and PMI™ are trade marks of Markit Economics Limited, RBC 
uses the above marks under licence. Markit and the Markit logo are registered 
trade marks of Markit Group Limited.

Royal Bank of Canada Gillian McArdle, Head of Communications, Canada RBC 
Capital Markets Telephone +001-416-842-4231 
Email gillian.mcardle@rbc.com      Elyse Lalonde, Communications Manager, 
Canada RBC Capital Markets Telephone +001-416-842-5635 
Email elyse.lalonde@rbc.com  Purchasing Management Association of Canada 
Cheryl Paradowski, President and CEO Telephone +001-416-542-9120 
Email cparadowski@pmac.ca      Cori Ferguson, Director, Public Affairs & 
Communications Telephone +001-416-542-9129 Email cferguson@pmac.ca  Markit  
Mark Wingham, Economist Telephone +44-1491-461-004 
Email mark.wingham@markit.com     Rachel Harling, Corporate Communications 
Telephone +001-917-441-6345 / +001-646-351-3584 
Email rachel.harling@markit.com 

Image with caption: "Manufacturing sector experiences strongest expansion in five months, though pace remains modest (CNW Group/RBC)". Image available at: http://photos.newswire.ca/images/download/20130301_C9245_PHOTO_EN_24145.jpg

SOURCE: RBC

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CO: Purchasing Management Association of Canada ST: Ontario NI: FIN ECO ECOSURV

-0- Mar/01/2013 14:30 GMT