Canada: Manufacturing PMI falls to lowest level since the pandemic in December
The S&P Global Manufacturing Purchasing Managers’ Index (PMI) fell from 47.7 in November to 45.4 in December. As a result, the index moved further below the 50.0 no-change threshold, and signaled a faster deterioration in manufacturing sector operating conditions compared to the previous month. December marked the worst reading since May 2020.
December’s downturn was the result of faster falls in output and new orders as elevated price pressures continued to drag on both domestic and external demand: Despite cooling slightly in December, the rate of input cost inflation remained elevated, driving firms to increase selling prices further. Firms reacted by cutting staff and scaling back input purchases. Finally, business sentiment remained depressed, despite climbing to a three-month high.
Though noting the burden of high price pressures, Paul Smith, economics director at S&P Global, was optimistic:
“Rates of inflation eased according to the PMI data, and given the increasingly weak demand environment, are likely to continue to fall in the months ahead. With employment also down quite noticeably, there are also signs of a loosening of the industrial labour market. This development will add to hopes that the Bank of Canada remains firmly on its stated path of restoring price stability in 2024.”