By Robb M. Stewart
Canadian manufacturing activity continued to worsen in June as the sector remained in contraction territory with falls in output, new orders and employment reported for the month, data showed Tuesday.
The S&P Global Canada manufacturing Purchasing Managers Index declined to 48.8 from 49.0 in May, the lowest reading for the index since March as it remained below the 50 threshold that separates expansion from contraction.
“Reports of subdued market demand, both at home and abroad, were widespread, with clients reportedly hanging back from committing to new business given the uncertain economic outlook,” Paul Smith, economics director at S&P Global Market Intelligence, said.
Manufacturers noted that high interest rates and the uncertain outlook were leading to the postponement of spending decisions by clients, Smith said. Companies also reported that new export orders were again down, with some firms pointing to lower demand from the U.S., he said.
New orders declined more steeply than production, the S&P survey showed.
Canadian manufacturers reported a marginal rise in warehouse inventories for a second month in a row, while inventories of purchases were reported to have declined for an 11th successive survey period.
S&P said confidence in the outlook remained positive, although it remained below trend, as firms hoped to eventually benefit from an economic recovery and past investment in marketing and promotional strategies. With current production and new order volumes subdued, companies on average chose to cut employment levels, though S&P said the marginal fall in workforce numbers made little difference in firms’ ability to deal with overall workloads as backlogs of work declined for an 11th consecutive month in June.
Industry-level gross domestic product, a broad measure of the goods and services produced across the economy, was essentially unchanged in April from the month before, though advance information points to growth of 0.4% in May, data released last week by Statistics Canada showed.
The Bank of Canada, which next meets to decide on interest rates July 12, last month boosted its benchmark policy rate one-quarter percentage point to a 22-year high of 4.75%, ending a short-lived pause on its aggressive tightening following strong consumer spending in the first quarter and amid concerns inflation could get stuck above its 2% target. Annual inflation cooled to 3.4% in May, the slowest pace since mid-2021.
Write to Robb M. Stewart at [email protected]
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