October 1, 2015 / 1:35 PM / 3 years ago

Canada manufacturing activity shrinks to lowest on record in August

OTTAWA, (Reuters) - Business conditions in the Canadian manufacturing sector fell to a record low in August as demand for new business weakened and new export orders stagnated as the country continues to feel the effect of cheap oil prices, data showed on Thursday.

The RBC Canadian Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 48.6 last month from 49.4 in August. It was the lowest level in the survey’s five-year history and the second month in a row the index has been below the 50 threshold showing the sector contracted.

“Overall conditions in the Canadian manufacturing sector continued to deteriorate in September due to underlying economic conditions, including renewed downward pressure on the price of oil,” said Craig Wright, chief economist at RBC.

Wright said weakness was primarily concentrated in the provinces of Alberta, where the oil sands are located, and British Columbia. Still, he expects an improving U.S. economy to boost Canadian exports and business conditions in the remainder of the year.

New orders shrank to 48.7 from 50.3, while new export orders slipped to 50.0 from 50.6. Employment remained in contraction territory though the pace moderated, with the measure rising to 48.2 from 47.2.

Canada was in a mild recession in the first half of the year as the oil-exporter has been hurt by the drop in the price of crude. But other recent data have shown growth picked up again at the start of the third quarter, suggesting the economy will fare better in the second half of 2015.

Reporting by Leah Schnurr, Editing by Chizu Nomiyama

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