TORONTO (Reuters) - Canada’s manufacturing growth slowed in June, pulling back from a sharp gain in May, suggesting that sluggish global demand is still weighing on the country’s export-oriented economy.
The RBC Canadian Manufacturing Purchasing Managers’ Index retreated to 52.4 in June, after adjusting for seasonal variation, from 53.2 in May. Despite the decline, the reading was the second highest since September.
A reading above 50 shows growth in the sector.
The index was supported by expansion of output and new orders, even though the pace of growth for both slowed from May.
“Canada’s manufacturing sector continued to expand in June - a sign that the slowdown earlier this year was in fact a temporary blip,” Craig Wright, chief economist at RBC, said in a statement.
“Moving into the second half of 2013, an anticipated strengthening in international demand will help the sector shake off its relatively lackluster performance it has recorded over the past year.”
The data highlighted one of the Canadian economy’s biggest challenges, a tentative global economic recovery that puts pressure on the country’s exports.
Government figures released on Friday showed Canada’s economy grew by just 0.1 percent in April from March, confirming that after a strong first quarter growth is slowing. The manufacturing sector grew by only by 0.2 percent, Statistics Canada said.
Global data also paints an uncertain picture, with signs of a gradual recovery in the United States, a slow withdrawal from a recession in Europe, and fiscal and growth challenges in China.
The PMI data on Tuesday showed stocks of finished goods were depleted in June even though new orders grew at a slower pace than in May.
“A further rise in new orders, partly reflecting greater client demand, continued to support growth of output and employment in June,” said Cheryl Paradowski, president and chief executive officer at Purchasing Management Association of Canada.
Export activity was also positive, helped by new orders from Europe. But rising input costs created more pressure on margins. The rate of input price inflation gathered pace and hit a three-month high.
Manufacturing conditions improved in most parts of Canada, with Alberta and British Columbia being the exceptions, the report said. Quebec showed a strong rise in output.
Editing by Jeffrey Hodgson and Leslie Adler