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.
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® (PMITM) 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.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Dean Popplewell