Manufacturing PMI hits 2012 high in April

Tue May 1, 2012 2:42pm EDT
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By Claire Sibonney

TORONTO (Reuters) - The pace of growth in Canadian manufacturing advanced at its strongest rate of the year in April as business conditions improved for a third straight month, reflecting a slow but steady recovery in the export-reliant sector.

The RBC Canadian Manufacturing Purchasing Managers' Index, released on Tuesday, rose to a reading of 53.3 in April versus 52.4 in March, above the 50 no-change mark that separates expansion from contraction.

"As the economy south of the border strengthens, we expect the Canadian manufacturing sector will continue to reap the benefits of increasing U.S. demand for key Canadian exports such as autos, machinery and lumber," Craig Wright, chief economist at Royal Bank of Canada, said in a statement, noting a strengthening in both output and in growth in new export orders.

The new export orders component of the index rose to its most robust level since April 2011.

Canadian manufacturers hired additional staff in April, though job creation was the slowest in three months, according to the report, which also showed the rate of input price inflation was the highest since last August.

Cheryl Paradowski, chief executive at the Purchasing Management Association of Canada, cautioned that while the RBC PMI signaled the strongest growth this year, the reading was still below the series average.

Companies attributed much of the rise to greater client demand and new contracts, suggesting Canada's manufacturing industry continues to make incremental strides, albeit with some interruptions.

Official data on Monday showed Canada's economy unexpectedly shrank by 0.2 percent in February, hit by temporary closures in the mining and other goods-producing industries.

The report put a bit of a damper on upbeat sentiment prompted by the Bank of Canada a couple weeks ago. The central bank surprised markets when it explicitly mentioned that a rate increase might be needed because of a stronger economy and underlying inflationary pressures.

(Editing by Jeffrey Hodgson and Peter Galloway)