February 3, 2020 / 2:38 PM / 2 months ago

Canadian factory activity increases at subdued pace in January

Workers make jackets at the Canada Goose factory in Toronto, Ontario, Canada, February 23, 2018. REUTERS/Mark Blinch

TORONTO (Reuters) - Canadian manufacturing activity expanded in January for the fifth straight month as a measure of new orders rose and business optimism strengthened, but the pace of growth remained sluggish, data showed on Monday.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 50.6 in January from a four-month low of 50.4 in December.

A reading above 50 shows expansion in the sector. The last time the index was below that level was in August last year.

“Canada’s manufacturing sector continued to experience subdued business conditions at the start of 2020, with production volumes rising only marginally amid subdued customer demand,” said Tim Moore, economics associate director at IHS Markit.

“Incoming new work did return to growth in January, but falling export sales constrained the overall rebound in order books,” Moore said.

The new orders index rose to 51.0 from 49.5 in December, but new export orders stayed in contraction, edging up to 48.9 from 48.7.

Last month, the Bank of Canada said that global economic conditions could have affected Canada’s economy more than was previously thought, as it opened the door to an interest rate cut.

Still, the future output index, a measure of business optimism, climbed to 64.1, its highest level since July 2019, from 61.0 in December as manufacturers hoped for an improvement in global trade conditions.

The United States and China reached an initial trade deal last month but investors have since worried that the coronavirus outbreak would hamper the global economy.

Reporting by Fergal Smith; Editing by Chizu Nomiyama

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