Canadian manufacturing business conditions in April improved to the greatest extent in 2012 so far, according to the RBC Canadian Manufacturing Purchasing Managers Index.

The main indicator improved to 53.3, up from 52.4 in March and reaching the highest index in four months. New export orders (especially from the U.S.) grew at the fastest pace for a year while output increased due to higher demand. Approximately 35% of firms reported larger volume of new orders compared the previous month.

However, employment growth was the weakest in three months even as Canadian manufacturers hired additional staff in April. The amount of inputs and the rate of input price inflation increased, with the rate of input inflation the strongest since last August. Selling prices and output charges increased to cover the higher input prices. Supplier delivery times lengthened as well.

Craig Wright, senior vice-president and chief economist, RBC said, "As the economy south of the border strengthens, we expect the Canadian manufacturing sector will continue to reap the benefits of increasing U.S. demand for key Canadian exports such as autos, machinery and lumber."

Due to the increase in new orders, Canadian manufacturers raised production and depleted stocks of finished goods in April.

Source: Royal Bank of Canada