August 4, 2015 / 1:35 PM / 2 years ago

Canada manufacturing conditions improve, but at slower pace

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

TORONTO, (Reuters) - Business conditions in the Canadian manufacturing sector continued to improve for the second month in a row in July, but at a slower pace than June, with an increase in export sales supporting the recovery.

The RBC Canadian Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions released on Tuesday, slid to 50.8 last month from June's six-month high of 51.3.

Growth had been contracting for much of this year prior to June, hurt by the impact of plunging crude prices. An index above the 50 mark reflects growth.

That growth, while modest, is in line with early expectations that Canada will fare better in the second half of the year than in the first half, where the latest data bolstered the view that the economy likely contracted in the second quarter as well.

"As we enter the second half the year, a strengthening U.S. economy and weaker Canadian dollar should provide a greater boost to exports and business conditions for manufacturers," said Paul Ferley, assistant chief economist at Royal Bank of Canada.

Manufacturing output expanded for the third month in a row, albeit at a slower pace, with the index at 51.6 for July compared with 52.9 in June.

Staffing levels declined to 49.5, its weakest since March, from 50.4 in June, with manufacturers saying softer demand at plants meant they did not replace workers who voluntarily left.

Reporting by Solarina Ho, Editing by Chizu Nomiyama

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