June 3, 2019 / 1:45 PM / 3 months ago

Canada manufacturing downturn gets worse on soft global trade conditions

TORONTO (Reuters) - The downturn in Canada’s manufacturing sector deepened in May as the depressed state of global trade led to a further decline in production, data showed

on Monday.

The IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI), a measure of manufacturing business conditions, fell to its lowest since December 2015 at a seasonally adjusted 49.1 last month from 49.7 in April.

A reading below 50 shows contraction in the sector.

The measure of output also fell to its lowest level in nearly three-and-a-half years, declining to 48.6 from 48.9.

Manufacturers attributed lower output to falling new orders and subdued global trade conditions, IHS Markit said.

The United States is in a trade war with China that has escalated in recent weeks.

Last month, the U.S. struck deals to lift tariffs on steel and aluminum imports from Canada and Mexico. U.S. President Donald Trump has since threatened to impose tariffs on Mexico’s exports to the United States, in a dispute over migration, but Canada has said it will press ahead to ratify the new North

American trade deal in tandem with its allies.

The new orders index was in contraction for the third straight month, falling to 47.8 from 48.6 in April. More encouragingly, the measure of employment rose to 50.3 from 49.7.

Employment has been a bright spot for Canada’s economy, which was hurt in late 2018 and early 2019 by slower growth in the construction and energy industries.

Data on Friday showed that the economy barely grew in the first quarter, but signs of a strong recovery in March supported the Bank of Canada’s view that the slowdown was temporary.

Reporting by Fergal Smith, Editing by Chizu Nomiyama

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