By Robb M. Stewart
Canadian manufacturing activity picked up slightly in April with output and employment firming but order books easing, data showed Monday.
The S&P Global Canada manufacturing Purchasing Managers Index rose to 50.2 from 48.6 in March, moving above the 50 threshold for the index that separates expansion from contraction.
“Although Canada’s manufacturing sector returned to growth in April, it did so only marginally with underlying data suggesting the recovery remained on shaky ground,” Paul Smith, economics director at S&P Global Market Intelligence, said.
Mr. Smith said that cost inflation remains high, with prices increasing by the largest level of the year so far and there was a further drop in new orders, though output and jobs growth were sustained.
“Clients are hesitant in their spending decisions, unsure of the direction of the economy at a time when prices remain high,” he said.
Canada’s economy has cooled of late following the central bank’s aggressive lifting of interest rates over the last year in an effort to tackle inflation. The Bank of Canada last month left its policy rate unchanged at a 15-year higher for a second monetary policy meeting in a row in anticipation inflation will continue to ease this year.
Data released Friday showed industry-level gross domestic product in Canada edged up 0.1% on a monthly basis in February after advancing 0.6% the month before. Statistics Canada’s early estimate suggested the economy shrank 0.1% on-month in March.
S&P Global said the advance in the manufacturing PMI for April was linked to a marginal rise in output that firms attributed in part to a rise in capacity capabilities, with those surveyed signaling better stability in labor provision. The rate of employment growth accelerated since March to reach the highest level since June last year, it said.
The survey showed that companies cut backlogs thanks to extra capacity and increased output, though also because incoming new orders fell modestly for a second consecutive month. Export sales were also down, extending the contraction to just under a year, S&P Global said.
Prices paid for inputs rose sharply in April, the data showed, with companies signaling costs were rising generally across a wide range of goods. Higher transportation costs were cited as a factor driving inflation, and there were reports of higher supplier surcharges being applied, despite some signs of improved stability in the supply of inputs, S&P Global said.
Write to Robb M. Stewart at robb.stewart@wsj.com
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