TORONTO (Reuters) - Canadian manufacturing growth slowed for a fourth straight month in October and hit a nine-month low, according to data released on Thursday, indicating that the third quarter’s underwhelming economic performance may continue into the end of the year.
The RBC Canadian Manufacturing Purchasing Managers’ Index was 51.39 last month, compared with 52.37 in September. It was the weakest reading since January.
Still, the index was above the 50 mark that separates expansion from deterioration.
“Canadian manufacturing continued to weaken in October, though the PMI measure is still indicative of growth in the sector, which is in contrast to flat to declining activity in most other countries,” Craig Wright, chief economist at Royal Bank of Canada, said in a statement.
The output component of the index saw its smallest month-over-month increases since January. New orders were also weak.
On the upside, faster growth in new export orders helped to offset weak domestic conditions with greater demand in key foreign markets such as Asia and the United States, Canada’s largest trading partner.
While employers continued to hire, job creation eased to a six-month low.
Prices for a range of raw materials - including resin, fuel and oil-based products - increased in October. But the rate of input price inflation eased and remained weak compared with the series average.
The data on manufacturing came a day after the government reported the Canadian economy shrank by 0.1 percent in August from July. Markets had been expecting very modest growth, and the contraction pointed to even more modest growth in the third quarter than in the first half of the year, supporting the central bank’s message that interest rate hikes are less imminent.
Canada fared better than most of its rich peers in the industrialized world in the aftermath of the 2007-09 global financial crisis, prompting the Bank of Canada in 2010 to become the first central bank in the Group of Seven to tighten monetary policy after the recession.
The Bank of Canada is still the only G7 central bank to have a tightening bias, although slightly less so than in previous months.
Canadian policymakers remain concerned about Europe’s seemingly unending debt crisis, as well as the potential for the U.S. economy to fall back into recession at the start of next year.
“This weakening may in part be related to continuing uncertainty around how fiscal imbalances in the U.S. and the euro area will be resolved,” said Royal Bank of Canada’s Wright. “Greater strength in the Canadian manufacturing sector may hinge on some of this uncertainty easing as policy measures outside of Canada are implemented.” (Editing by Jeffrey Hodgson and Leslie Adler)