The August RBC Canadian Manufacturing PMI indicated that business conditions continued to improve in the sector with an index reading of 52.1. However, this represented only a marginal improvement relative to a July reading of 52.0. Over the last four months this measure has been relatively stable fluctuating between 52.0 and 53.2.
Though this represents a modest level of sentiment historically, it is up from much lower readings the previous six month period, starting in November 2012, where the index only averaged 50.4. This earlier weakness in the PMI likely reflected uncertainty about the impact of U.S. fiscal restraint at the start of this year on growth in the U.S. economy.
Subsequent data has indicated that the U.S. economy managed to continue to grow though at a very modest pace with the fiscal restraint taking its toll. This may have limited the bounceback in the PMI over the last four months given the Canadian manufacturing sector’s strong integration with the U.S. economy.
The bank's overall PMI reflects the combined effect of five key components. In August, one measure improved significantly, one deteriorated sharply and the remaining three were relatively unchanged.
The component that showed the greatest improvement was the employment measure that jumped to 53.8 in August from 52.8 in July which indicated manufacturers are even more willing to take on additional workers. Offsetting weakness was provided by the stock of purchases measure which dropped to 49.7 from 50.8 in July.
This indicated that manufacturers have gone from building input inventories to modestly depleting them. The key new orders measure encouragingly indicated continued growth with an index reading of 52.6 though this was unchanged from July. Output continued to grow in August though at a relatively moderate pace given an index reading for this component of 51.6 that was down slightly from 51.8 recorded in July.
Finally, the supplier delivery times measure, which enters inversely into the PMI, indicated lead times lengthened with an index reading of 48.8 though marginally less than in July which had an index reading of 48.7.
