Business conditions in the Canadian manufacturing sector deteriorated in May for a fourth month in a row as new orders and employment remained soft, data showed on Monday.
The RBC Canadian Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, edged up to a seasonally adjusted 49.8 last month from 49.0 in April.
The index has been below the 50 mark that indicates growth in the sector since February, though the pace of contraction has been steadily improving.
While there wasn't enough traction to shift the sector into growth in May, the slight improvement was encouraging, said Craig Wright, chief economist at RBC.
"Moving into the second half of the year, we expect a strengthening U.S. economy and a weakening in the currency will fuel demand for Canada's exports, which should have a positive effect on manufacturers," Wright said.
The soft report could suggest economic weakness continued into the second quarter after the economy saw its worst pace of contraction in nearly six years in the first quarter.
The rate of weakness in new orders eased, with the index rising to 49.2 from 47.5. New export orders stabilized at 50.1 from 49.1.
While some firms said the weaker Canadian dollar had helped support export orders, others said falling capital spending in the energy sector still weighed on overall demand.
Output improved to 51.1 from 49.5, while employment stagnated at 49.7.
Reporting by Leah Schnurr, Editing by Chizu Nomiyama