Outlook good for Ontario manufacturers despite dip in PMI

Output and new orders continued to rise for Canada’s manufacturers in December, though at a slightly weaker rate than in previous months. Companies hired workers and increased buying activity to meet increased demand; however, the monthly RBC Canadian Manufacturing Purchasing Managers’ Index (PMI) fell from 55.3 in November to 53.9 in December, a three-month low. This is still in “firm expansion territory” according to RBC, indicating a moderation in the pace of improvement. New business continued to increase for manufacturers, but at a slightly slower pace.

“Despite the recent fluctuation in commodity prices, particularly for oil, we continue to be constructive on the overall economic environment in Canada, including exports, which should mean good things for manufacturing going forward,” said RBC assistant chief economist Paul Ferley.

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The strongest increase in manufacturing output was in Ontario. As reported in the Financial Post, advanced manufacturing, including aerospace and automotive, is worth approximately $275 billion to the economy each year, accounting for 81 per cent of the province’s total exports. Almost half of all Canadian manufacturing (47 per cent) takes place in Ontario, and the manufacturing sector employs 2.3 million workers, 800,000 of those directly.

The president of Canadian Manufacturers and Exporters (CME) Ontario spoke of a “rebirth” in the auto parts and aerospace sectors, including the recently announced investment by Pratt & Whitney Canada of $1 billion in research and development. Smaller aerospace manufacturing companies that make products like electrical wiring, tubing, moulded parts, landing gear and precision parts for engines have been growing, in some cases since the 1990s. The auto parts manufacturer Linamar is reported to have $1 billion of new work on the books, and is looking for staff.

Despite the recent fluctuation in commodity prices, particularly for oil, we continue to be constructive on the overall economic environment in Canada, including exports, which should mean good things for manufacturing going forward.

RBC economist Paul Ferley

Looking for staff is a common problem for Ontario’s manufacturers. A recent Management Issues Survey done by CME revealed that 60 per cent of respondents consider the shortage of skilled labour their biggest concern. There is an immediate need for 270 CNC machinists, for example, a demand that will grow to 700 in the next two years.

Ontario’s nuclear industry is also poised for a “significant upswing,” according to the president of the Organization of Canadian Nuclear Industries, Ron Oberth. The industry is looking for new business in China, India and the UK, where new nuclear power plants are being built to replace coal. The industry is forecasting that it will need more than ten thousand new workers in the next eight years.

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