The numbers are in: manufacturing production in freefall
April 1, 2020
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Manufacturing production fell at the fastest pace in nine-and-a-half years in March, according to the latest data compiled by IHS Markit.
Record declines in output, new orders and employment reflected shrinking customer demand amid the global public health emergency, according to data collected during the two-week period of March 12-25.
“Canadian manufacturers reported the steepest downturns in production, new orders and employment for at least nine-and-a-half years in March,” said Tim Moore, economics director at IHS Markit. “Shrinking customer demand was almost exclusively attributed to production stoppages at home and abroad amid emergency public health measures to halt the COVID-19 pandemic. Some manufacturing companies cited an additional fall in new business related to a sharp drop in spending by clients in the energy sector.”
The shortages of manufacturing inputs and the steepest lengthening of suppliers’ delivery times haven’t been seen since the survey began in October 2010.
The headline seasonally adjusted IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) dropped from 51.8 in February to 46.1 in March, to register below the 50.0 no-change threshold for the first time since August 2019.
Production volumes fell rapidly in March (index at 41.2), which survey respondents overwhelmingly attributed to reduced operating capacity and shrinking demand amid emergency public health measures to slow the spread of COVID-19. Mirroring the trend for output levels, latest data also indicated the fastest reduction in new business volumes since the survey began in October 2010.
“The latest survey also highlighted by far the steepest lengthening of suppliers’ delivery times since the survey began in October 2010, with manufacturers most commonly citing shortages of materials and severe supply chain disruptions across Asia and Europe,” said Moore.
Where growth was reported, this was mainly among food producers and those in the pharmaceuticals sector.
Meanwhile, some manufacturers noted that the slump in oil prices had been a key factor behind lower customer demand in March.
Lower export sales were almost exclusively attributed to business shutdowns and closed borders in response to the global public health emergency.
The latest decline in staffing levels was the fastest since the survey began, slightly exceeding the previous record seen in December 2015. Business expectations for the year ahead also worsened to a considerable degree and hit a survey-record low.
Average cost burdens increased only marginally in March, with higher raw material prices mostly linked to exchange rate depreciation against the US dollar. Meanwhile, factory gate charges rose at the slowest pace since October 2019.