Manufacturers in Canada signaled the slowest improvement in overall business conditions in four months during May, largely reflecting a further moderation in output growth, according to the RBC Canadian Manufacturing Purchasing Managers' Index.
At 52.2 in May, down from 52.9 in April, the headline RBC PMI remained above the neutral 50.0 mark, but eased to its lowest level since January. The index was also weaker than the 53.3 average since the survey began in late 2010.
The decline in the headline PMI reading during May was driven by a moderation in output growth to the slowest pace since August 2013. Meanwhile, the rate of new order growth across the manufacturing sector was unchanged from April, but was still the joint-weakest for 13 months. May data also indicated only a marginal pace of new export order growth. The latest increase in new business from abroad was the slowest since the current period of expansion began in April 2013.
Relatively subdued gains in incoming new business resulted in a moderation in capacity pressures across the manufacturing sector. This was highlighted by the rate of backlog accumulation easing to a three-month low in May. A slower rise in unfinished business also reflected ongoing employment growth during the latest survey period.
The latest increase in staffing levels was the most marked since November 2013. Companies that boosted their staffing levels generally commented on the launch of new products and optimism about the wider economic outlook.
Slower output growth meanwhile contributed to a weaker increase in input buying during May. Latest data pointed to only a marginal rise in purchasing activity, with the pace of expansion easing from the four-month high registered in April. Manufacturers decreased their stocks of finished goods for the first time in seven months, while pre-production inventories also saw a renewed decline in May. Some companies cited inventory reduction policies in response to subdued new business growth at their plants.
