April 1, 2015 / 1:33 PM / 2 years ago

Canada manufacturing activity shrinks for second month in March

Production Associates inspect cars moving along assembly line at Honda manufacturing plant in Alliston, Ontario March 30, 2015.Fred Thornhill

Activity in the Canadian manufacturing sector contracted for a second straight month in March, the first back-to-back deterioration in the survey's history, data showed on Wednesday.

The RBC Canadian Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, edged up marginally to a seasonally adjusted 48.9 last month from February's record low of 48.7.

A reading below 50 shows contraction in the sector. The index averaged 49.5 for the first quarter, its weakest since the survey began in 2010. Economists expect the economy overall to grow modestly in the first quarter, though they note there is a risk it could contract.

The report signaled that the manufacturing sector continues to face headwinds, said Craig Wright, chief economist at RBC.

"We remain confident that as the U.S. economy continues to strengthen and the Canadian dollar becomes more competitive, there will be an uptick in exports, a good sign for manufacturers – we need some time to see this materialize," he said.

Companies surveyed suggested that less capital spending in the energy sector weighed on new business intakes.

The new orders index improved slightly to 48.4 from 48.1, and the contraction in output moderated.

Reporting by Leah Schnurr; Editing by Meredith Mazzilli; leah.schnurr@thomsonreuters.com; +1 613 235 6745; Reuters Messaging: leah.schnurr.thomsonreuters.com@reuters.net; Twitter: @LeahSchnurr

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