IHS Markit Canada Manufacturing PMI®

April data revealed a downturn in business conditions across the Canadian manufacturing sector for the first time in more than three years. The weaker performance mainly reflected modest reductions in output, new orders and employment during the latest survey period. Manufacturers responded to softer customer demand by cutting back their input buying and streamlining their inventories in April. On a more positive note, input cost inflation remained much softer than the peaks seen last summer, despite pressure from rising transportation costs.

The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index® (PMI®) dropped from 50.5 in March to 49.7 in April, to signal a slight deterioration in overall business conditions. Moreover, the latest PMI reading was the lowest since February 2016.

Manufacturing production declined for the first time in two-and-a-half years, although the rate of contraction was only modest. Reports from survey respondents suggested that the fall in output reflected a realignment of production schedules with softer client demand.

New work decreased for the second month running in April, which marked the first back-to-back fall in manufacturing sales since the beginning of 2016. Companies noted that less favourable economic conditions in both domestic and external markets had acted as a brake on new business volumes. Export orders have now decreased in four of the past five months, although the rate of decline eased since March. Manufacturers continued to suggest that a general slowdown in global trade and heightened business uncertainty had dampened customer demand.

Weaker order books contributed to reduced pressure on operating capacity in April. This was highlighted by a marked decline in backlogs of work, with the rate of contraction the sharpest since December 2015. Manufacturing firms indicated greater caution in terms of their staff hiring during the latest survey period, with overall payroll numbers falling for the first time since September 2016. However, the rate of decline in employment levels was only fractional.

Tighter inventory management policies were signalled in April, with both stocks of inputs and finished goods inventories both declining across the manufacturing sector. The drop in pre-production stocks was achieved through the fastest reduction in purchasing activity for over three years.

Softer demand for inputs contributed to relatively subdued cost pressures in April, although the rate of inflation edged up from March's 30-month low. A number of firms cited both exchange rate factors and higher transplantation costs. At the same time, competitive pressures held back factory gate price inflation, with the latest rise in output charges still much weaker than the survey-record peak recorded last summer.

Regional data indicated that Quebec was the best performing area for manufacturing business conditions in April, followed by Ontario. The main bright spots for export sales were Alberta & British Columbia, with a rebound in new work from abroad contrasting with the declines seen elsewhere in April.


Christian Buhagiar, President and CEO at SCMA, said:

"April data illustrates another loss of momentum for the manufacturing sector, following the sharp slowdown in growth seen during the first quarter of 2019. The latest survey indicates that overall business conditions deteriorated to the greatest extent in over three years as manufacturers cut back production and staff hiring in response to weaker sales.

"Canadian manufacturers reported subdued demand conditions in both domestic and external markets during April, which was often linked to a slowdown in global trade volumes and more cautious spending among clients.

"Worsening export order books were recorded in all regions except Alberta & British Columbia during April, with manufacturers in Ontario experiencing the greatest reduction."


April data signalled a reduction in manufacturing output for the first time in two-and-a-half years. This was highlighted by the seasonally adjusted Output Index falling below the 50.0 no-change value. The latest reading was the lowest since December 2015, but signalled only a marginal rate of decline.

Lower production volumes were attributed to a realignment of output to reflect softer demand from both domestic and export markets.

New Orders

Canadian manufacturers reported a decline in new work for the second month running in April. The seasonally adjusted New Orders Index dipped to its lowest for over three years, but was only slightly below the neutral 50.0 threshold.

Survey respondents continued to cite cautious spending among clients and more subdued global economic conditions.

New Export Orders

The seasonally adjusted New Export Orders Index registered in contraction territory for the fourth time in the past five months. That said, the latest reading was higher than in March and signalled only a marginal fall in new work from abroad.

Some firms noted that global trade frictions had contributed to greater business uncertainty and acted as a brake on export sales.

Backlogs of Work

Capacity pressures appear to have eased across the manufacturing sector, as highlighted by a fall in the seasonally adjusted Backlogs of Work Index to its lowest since December 2015.

Reduced volumes of unfinished work have been recorded in each of the past two months, which represents the first back-to-back decline in unfinished work since the beginning of 2017.

Stocks of Finished Goods

Inventory reduction continued across the manufacturing sector in April, with stocks of finished goods depleted for the fifth consecutive month. The seasonally adjusted Stocks of Finished Good Index nonetheless picked up from March's 16-month low.

Reduced post-production inventories were linked to a combination of faster shipments and softer customer demand.


The seasonally adjusted Employment Index dropped below the crucial 50.0 no-change mark for the first time since September 2016, thereby ending a two-and-a-half year period of jobs growth at manufacturing companies.

Survey respondents commented that reduced optimism about the near-term business outlook had contributed to more cautious staff hiring policies at their plants.

Quantity of Purchases

Manufacturers cut back their purchasing activity in April, which continued the downward trend seen during the previous month.

The seasonally adjusted Quantity of Purchases Index was the lowest since December 2015, although the latest reading signalled only a modest rate of decline.

Suppliers’ Delivery Times

Longer lead time for materials continued in April, as highlighted by the seasonally adjusted Suppliers' Delivery Times Index posting below the 50.0 no-change mark.

However, the latest reading signalled a much softer degree of pressure on manufacturing supply chains than the records seen last summer.

Stocks of Purchases

The seasonally adjusted Stocks of Purchases Index pointed to a decline in pre-production inventories for the third month running in April.

Reduced inventories were attributed to deteriorating demand conditions and efforts to improve working capital efficiency.

Input Prices

The seasonally adjusted Stocks of Purchases Index pointed to a decline in pre-production inventories for the third month running in April.

Reduced inventories were attributed to deteriorating demand conditions and efforts to improve working capital efficiency.

Output Prices

The seasonally adjusted Output Prices Index signalled a slightly stronger rise in factory gate charges than in March, but the rate of inflation remained much softer than the peaks recorded last year.

Manufacturers noted that competitive pressures and lower input cost inflation had acted as a brake on their average prices charged.

Future Output

Canadian manufacturers remain upbeat overall about the year ahead outlook for production growth at their plants. Moreover, the Future Output Index was only slightly below the average seen in 2018 as a whole.

Survey respondents commented on hopes of a rebound in global trade conditions and an associated improvement in customer demand. However, some firms continued to cite concerns about the near-term economic outlook.


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