Canadian manufacturing shows solid growth in April

April data signalled another robust expansion in operating conditions in the Canadian manufacturing sector, despite a slight moderation in March, as looser COVID-19 restrictions and a general improvement in demand conditions led to strong inflows of new work.
As a result, output and purchases rose sharply, according to new data from S&P Global.
Meanwhile, strong capacity pressures continued to emerge, with companies responding in kind by raising staffing levels at an accelerated pace.
“The start of the second quarter of 2022 yielded another favourable month of trading for Canadian manufacturers. Demand conditions were supportive and continued to underpin a solid improvement in operating conditions. As has been the case over the last year or so, consumer demand remains strong despite elevated rates of inflation,” said Shreeya Patel, economist at S&P Global. “However, capacity constraints have persisted and firms look to be struggling with labour shortages. Recent geopolitical developments have also exacerbated costs, particularly for fuel and raw materials. At the same time, anecdotal evidence often mentioned shortages of trucks which could further impact production in the future.
There were widespread reports of material scarcity, truck shortages and freight delays last month, which consequently led to a sharp rise in backlogs.
“Nevertheless, Canada’s manufacturing sector has performed strongly despite supply bottlenecks, COVID-19 and increasing uncertainty. Firms remain prepared and continue to foresee output growth over the coming months,” said Patel.
Raw material scarcity and lengthy lead times prompted Canadian manufacturing firms to raise their pre-production inventories. Stockpiling has now been seen in each of the last 15 months. Purchasing activity, meanwhile, rose substantially, and at the third-strongest rate in the series history.