May 19, 2020

RBC report finds manufacturing sector outlook in three month low

Royal Bank of Canada
RBC Canadian Manufacturing PMI
Supply Chain Management Association
Canadian manufacturing industry
awrara ra
4 min
RBC report finds manufacturing sector outlook in three month low

June data suggested that the Canadian manufacturing recovery stepped down a gear at the end of the second quarter, with output, new business and employment growth all easing slightly since May.

Moreover, new export orders were virtually unchanged in June, which contrasted with the solid contribution to growth seen earlier in 2016. At the same time, stocks of finished goods dropped at a survey-record pace in June, with manufacturers noting that subdued client demand and uncertainty about the economic outlook had encouraged tighter inventory management at their plants.

A monthly survey, conducted in association with Markit, a leading global financial information services company, and the Supply Chain Management Association (SCMA), the RBCPMI offers a comprehensive and early indication of trends in the Canadian manufacturing sector.

Adjusted for seasonal influences, the RBC Canadian Manufacturing PMI registered 51.8 in June, down from 52.1 in May. Although the index posted above the 50.0 no-change value for the fourth month running, the latest reading signalled only a marginal upturn in overall business conditions and the weakest pace of improvement since March.

“While the slowdown in the growth of manufacturing during June is disappointing, Canadian manufacturers did indicate a marginal upturn in new business volumes,” said Craig Wright, senior vice-president and chief economist, RBC. “Currency weakness and stronger U.S. demand should drive further exports, however growing economic uncertainly means that the roller coaster we’ve experienced recently in the Canadian export market will likely continue,” added Wright.

The headline RBC PMI reflects changes in output, new orders, employment, inventories and supplier delivery times.

Key findings from the June survey included:

  • Output growth eases from May’s 11-month high
  • Marginal increase in new business volumes
  • Stocks of finished goods fall at fastest pace since the survey began in October 2010
     

A slowdown in output growth from May’s 11-month high was one of the key factors weighing on the headline PMI during June. The latest expansion of production volumes was the weakest since March, which manufacturers linked to softer client demand and efforts to reduce finished goods inventories at their plants. Post-production stocks have now fallen in each month since April and the latest reduction was the steepest for over five-and-a-half years.

Canadian manufacturers indicated a marginal upturn in overall new business volumes in June. The latest survey suggested that domestic sales were a key driver of growth, as new export work was broadly unchanged over the month. Higher levels of business underpinned further staff recruitment across the manufacturing sector in June, which extended the current period of net job creation to four months. However, the pace of employment growth eased slightly since May amid reports of heightened uncertainty about the business outlook and a lack of pressure on operating capacity.

Survey respondents pointed to ongoing supply chain pressures in June, with average lead-times from vendors lengthening to the greatest degree since December 2014. This was linked to unusually low stocks at suppliers and a marginal upturn in input buying among manufacturers. Despite a rise in purchasing activity, latest data signalled that pre-production inventories were broadly unchanged over the month, which firms mainly linked to cautious stock policies at their plants.

June data signalled a return to rising factory gate charges among Canadian manufacturers, although the rate of inflation was only marginal. A number of firms noted that subdued underlying demand had acted as a brake on output charge inflation and placed pressure on margins. Moreover, higher steel and fuel prices contributed to a robust rise in average cost burdens in June. The latest increase in overall input prices was the fastest recorded since March.

Regional highlights include:

  • Manufacturing business conditions improve in all regions except Alberta & B.C.
  • Quebec and ‘Rest of Canada’ record fastest rises in manufacturing output during June
  • Ontario experiences slowest pace of production growth so far in 2016
     

“Canada’s manufacturing sector continued to expand in June, as the latest PMI survey points to a sustained recovery in output and staff hiring through the second quarter of 2016.” said Cheryl Farrow, president and chief executive officer, SCMA. “However, manufacturers have seen export growth slow in recent months, reflecting risk aversion and heightened economic uncertainty across the global economy. Worries about the business outlook have already weighed on inventory management for manufacturers, with stocks of finished goods falling at the fastest pace for over five-and-a-half years in June.”

The report is available at www.rbc.com/newsroom/pmi.

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Read the June 2016 issue of Business Review USA & Canada magazine

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Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Tax
Compliance
financeleaders
Deloitte
Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.

According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.

And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.

Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.

Trend 1: Businesses seek more strategic counsel from tax

Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.

According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”

Trend 2: Tipping point for resourcing models

Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.

Trend 3: Digital tax administration is moving faster than expected

in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.

"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."

Trend 4: Data simplification and lower-cost resourcing are top priorities

Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.

At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”

Trend 5: Skillsets are shifting

Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.

Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact 

Trend 6: 2020 brought productivity improvements

Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.

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