Canada’s Manufacturing PMI shows continued sector weakness in June

By Fergal Smith

TORONTO (Reuters) – Canadian manufacturing activity worsened in June, extending the sector’s record-breaking streak of recession as new orders fell and companies cut jobs for the first time in five months, data showed on Tuesday.

The S&P Global Canada manufacturing Purchasing Managers’ Index (PMI) was unchanged in June, equaling the seasonally adjusted level of 49.3 recorded in May.

It was the 14th consecutive month that the PMI had been below the neutral mark of 50.0, the longest such period in the data since October 2010. A reading below 50 indicates a recession for the sector.

“The Canadian industrial economy remained weak in June,” Paul Smith, chief economic officer at S&P Global Market Intelligence, said in a statement.

“Panelists noted that demand in the underlying market remained weak, while commenting that sales were likely weaker than expected – resulting in some excess inventory build-up at their facilities.”

The new orders index was 48.2, up slightly from 48.1 in May, while the employment index began to contract for the first time since January, falling to 49.2 from 50.3.

The only positive data point was an easing of cost pressures, with the input price index falling from 53.8 in May to 53.6, its lowest level since January.

“A positive aspect of the latest survey is that pricing pressures appear to be contained overall, with costs rising at a slower rate than in recent months and fees only rising modestly,” Smith said.

“However, limited pricing power is largely a function of weak demand and a competitive market, and as companies see prices remain too high for many customers, confidence in the future has weakened to its lowest level this year.”

The future production index fell to 60.1 from 62.1 in May, the lowest reading since December.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)