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TORONTO (Reuters) - The pace of growth in Canada's manufacturing sector stepped back in June as measures of output, new business and employment all fell, data showed on Monday, the latest sign Canada's economy is struggling to gain momentum.
The RBC Canadian Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, dipped to a seasonally adjusted 51.8 last month from 52.1 in May.
It was the fourth month in a row the index has been above the 50 threshold that indicates growth in the sector, but the latest reading signaled only a modest upturn and was the weakest pace of improvement since March.
Slower output growth was one of the major drags on the headline PMI. The output index fell to 51.5 from May's 11-month high of 52.8, as manufacturers reported softer client demand and efforts to reduce finished goods inventories at their plants.
New orders fell to 50.8 from 51.9, taking a further step back from a 16-month peak of 52.4 in April, and employment dipped to 52.0 from 52.2 as heightened uncertainty about the business outlook and a lack of pressure on operating capacity weighed.
A marginal upturn in overall new business volumes was indicated by manufacturers, but driven by domestic sales as new export work was broadly unchanged over the month.
"Currency weakness and stronger U.S. demand should drive further exports, however growing economic uncertainty means that the roller coaster we've experienced recently in the Canadian export market will likely continue," said Craig Wright, chief economist at RBC.
The Canadian economy continues to struggle with the impact of cheaper oil, a major export for the country. Data released last week showed only modest growth in the economy in April after two months of declines, paving the way for a sickly second quarter on the back of the devastation caused by major wildfires in Alberta.
Reporting by Fergal Smith, Editing by Chizu Nomiyama