The September RBC Canadian Manufacturing Purchasing Managers' Index indicated a sharp jump in business conditions in the sector to 54.2 from 52.1 in August. Encouragingly, this represented the highest level of confidence over the past 15 months.
The overall PMI reflects the combined effect of five key components. In September, all five components contributed to the improvement.
Encouragingly the biggest increase occurred in the key new orders component which jumped to 56.1 from 52.6 in August. This represented the fastest pace of growth of new orders in fifteen months. The increase was attributed to "new product launches, as well as greater demand, both domestically and in key export markets such as the United States."
The bank also said its production measure also rose to 53.5 in September from 51.6 in August with the employment measure rising to 54.5 from 53.8. The stock of purchases measure was only slightly above the 50 level, indicating that firms were once again modestly building input inventories following a reading in August of 49.7. The delivery times measure, which enters the PMI inversely, indicated that delivery times lengthened even more in September compared to August with this measure dropping to 46.6 from 48.8.
"As signs of gradual improvement emerged along both of these fronts," according to Canada's largest bank, "the PMI jumped higher in May and held steady at an average of 52.4 over the next four months. Encouragingly, the September data is possibly indicating that confidence has taken another step up.
"Our expectation is that the external environment will remain sufficiently constructive that September’s higher level of business confidence will be sustained going forward. "
