Canada: Manufacturing PMI posts meager expansion in December
January 2, 2020
In December, the IHS Markit Manufacturing Purchasing Managers’ Index (PMI) inched down to 50.4 from 51.4 in November. December’s PMI reading marked a four-month low and followed up three consecutive monthly improvements. Nevertheless, the PMI remained above the neutral 50-threshold, therefore signaling an improvement in manufacturing operating conditions from the previous month.
December’s outturn reflected the weakest expansion in output in three months, and was likely due to subdued demand from the automotive and energy sectors. Meanwhile, new export orders fell in December due to weaker U.S. demand and despite improved buying conditions from China. Headcounts increased at a weaker pace in December and firms reported the weakest projections for future output in approximately four years. Moreover, delivery times lengthened to the longest since last February and mainly the result of CN rail strikes in mid-December, which delayed shipments and also led to a notable depletion of inventories.
Going forward, temporary setbacks in the fourth quarter such as the September-October General Motors strike in the U.S. and the CN rail strike which hampered capacity levels in December are expected to fade. Furthermore, a possible abatement in the U.S.-China trade spat, a rebound in demand from Chinese firms for Canadian manufactured goods and the ratification of the USMCA should support the manufacturing sector this year. That being said, business sentiment among manufacturing firms hit a near four-year low in December which suggests global headwinds are projected to linger in 2020.
Author: Steven Burke, Economist