Canada Manufacturing Sector PMI Rises Above Contraction Territory to 50.4 in September

By Robb M. Stewart

Canadian manufacturing activity picked up last month, showing signs of stabilizing after a downturn that has extended for more than a year, data showed Tuesday.

The S&P Global Canada manufacturing purchasing managers index rose to 50.4 in September from 49.5 the month before. The advance lifts the index above the 50 threshold that separates expansion from contraction for the first time since April 2023.

The PMI data offered encouraging signs for the manufacturing economy, supported by the first rise in new orders in nearly a year and a half, Paul Smith, economics director at S&P Global Market Intelligence, said.

"Panelists pointed to slightly better market demand at home as a factor underpinning growth, which served to offset a further deterioration in foreign sales," Smith said.

The pace of growth in Canada's economy has been lackluster in recent months since recovering from a stall in the second half of last year. Industry-level gross domestic product in July rose 0.2% from the month before, but preliminary data from Statistics Canada indicates it was essentially unchanged in August with declines in manufacturing and transportation offsetting increases in oil and gas extraction.

Economists widely expect the Bank of Canada will again cut its policy interest rate later this month after annual inflation in August eased to the central bank's 2% target. That would mark a fourth cut in as many policy meetings after the Bank of Canada in June became the first Group of Seven central bank to offer rate relief.

S&P Global's data showed a slight lift in new orders in September, reflecting an improvement in market demand and the release of new product lines.

Still, it said the survey found many reports that underlying demand conditions remained subdued, especially from foreign clients. New export orders declined for a 13th consecutive month in September, and to a greater extent than in August.

The S&P Global PMI output index rose to a seven-month high and indicated a near-stabilization, though production was weighed down to some degree by efforts to meet sales directly from stock wherever possible, the survey said. Inventories of finished goods declined for the first time in five months.

Average input prices rose again in September, with the rate of inflation reaching its highest level since April 2023 as a wide range of goods were reported to have increased, the report said. Manufacturers had limited pricing power to pass on higher input costs to clients, and overall output charges rose only modestly and at a slower pace than in August.

S&P Global said manufacturers' confidence in the outlook picked up since August, and reached its highest level since May. It said there are hopes of an improvement of market conditions in the months ahead, with the upcoming U.S. election results expected to provide some much-needed geo-political stability, while lower interest rates should also help to stimulate growth.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 01, 2024 10:07 ET (14:07 GMT)

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