The pace of growth in Canadian manufacturing picked up to its fastest rate of the year in March, building on gains from the previous month after a sharp slowdown in January, demonstrating the economy continues to make incremental strides.
The RBC Canadian Manufacturing Purchasing Managers’ Index, released on Monday, edged up to a reading of 52.4 in March from 51.8 in February, marking another month of expansion above the 50 no-change mark.
“Activity in the Canadian manufacturing sector has been bucking the general trend of softening conditions, particularly in Europe and Asia,” said Craig Wright, chief economist at Royal Bank of Canada.
New orders increased over the month. Output was also positive, although the rate of growth was the second weakest in the 18-month survey history.
Meanwhile, job creation hit at a four-month high in March.
“Canadian manufacturers will continue to benefit from the strengthening U.S. economy, which started 2012 on a much more promising note. We expect to see continued demand for key Canadian exports, such as autos, machinery and lumber, south of the border, with real exports returning to pre-recession peak levels in 2013,” Wright added.
Firms generally attributed the latest improvement in business conditions to greater client demand, suggesting Canada’s manufacturing continues to plod along.
Similarly, data on Friday showed domestic growth started 2012 on slightly firmer ground. Canada’s economy grew 0.1% in January compared with December, as continued strength in manufacturing was partially offset by a slowdown in natural gas extraction.
Recent lacklustre Canadian economic data combined with subdued global growth is expected to keep the Bank of Canada from raising interest rates until the third quarter of 2013.
Among the softer details of the RBC PMI report, Canadian manufacturers reported higher input costs in March, with a rise in fuel, steel and resin prices. Still, the rate of input price inflation was the weakest in three months.
Meanwhile, firms reduced their selling prices in the month due to stronger competitive pressures. Notably, the latest survey period marked the first reduction in factory gate prices in 18 months of data collection.