Manufacturing PMI shows modest Feb. growth


, Last Updated: 12:43 PM ET

The pace of growth in Canadian manufacturing picked up modestly in February after weakening the previous month, helped by a pickup in output and new orders despite a fall in export demand.

The RBC Canadian Manufacturing Purchasing Managers’ Index, released on Thursday, edged up to a reading of 51.8 in February from 50.6 in January. While the index was above the 50-point mark that separates expansion from contraction, it was still the second weakest since the survey began in October 2010.

“While we observed a modest improvement from January’s sharp slowing, the Canadian manufacturing sector’s growth rate remained tepid in February,” Craig Wright, chief economist at Royal Bank of Canada, said in a statement.

Growth in output among manufacturers outpaced the increase in new orders, but both significantly lagged the survey’s historical averages.

About 22% of respondents reported a larger volume of new orders. New export orders, however, were down for a second straight month in February, hitting their lowest level in 17 months of data collection.

Also hurting manufacturers in February were rising oil and metal prices, which increased operating costs.

“Panellists particularly mentioned higher costs for steel and fuel, with the overall rate of input price inflation the strongest since August 2011,” Cheryl Paradowski, chief executive at the Purchasing Management Association of Canada, said in a statement.

The rise in new work intakes led to a hiring bump in February after the sector lost jobs in January. About 14% of surveyed companies added staff last month.

“The slight uptick in manufacturing employment is in line with our view that Canada’s broader labour market will shake off its recent slump and start to ramp up again in the months ahead,” Wright said.

Canada added just 2,300 net new jobs in January and the unemployment rate rose to 7.6% from 7.5% in December. February jobs data will be released next week.

Economic growth has also slowed, with the latest monthly gross domestic product numbers, for November, showing a slight contraction.

The European debt turmoil and a choppy U.S. recovery have forced the Bank of Canada to keep its overnight target rate at a very low 1% since 2010 in an effort to stimulate the economy.

The median forecast in a Reuters poll released on Wednesday was that the central bank will not interest raise rates until the second quarter of 2013.

(Editing by Jeffrey Hodgson and Peter Galloway)