By Robb M. Stewart
Operating conditions for Canadian manufacturers deteriorated last month, with steeper declines in production and new orders, data showed Thursday.
The S&P Global Canada manufacturing purchasing managers index was in contraction territory for a 1th consecutive month, with the reading falling to 47.8 in July from 49.3 the month before, signaling the steepest weakening in conditions so far this year. The 50 threshold separates expansion from contraction.
Paul Smith, economics director at S&P Global Market Intelligence, said the second half of the year began with accelerated declines in both output and fresh orders and the manufacturers surveyed circumspect in their purchasing and input inventory management by adjusting these downward to reflect a weaker and uncertain operating environment.
After stalling in the second half of last year, Canada's economy has rebounded in 2024 even as unemployment has continued to edge higher and inflation has cooled. Still, growth has waned in recent months. The Bank of Canada last month again lowered its policy interest rate after it in June became the first Group of Seven central bank to offer rate relief, and officials have warned the economy needs to pick up to avoid inflation falling too far.
S&P Global's survey showed manufacturing production was down a 12th successive month, with July marking the steepest fall since last December. That was closely linked to a deterioration in new orders, and those surveyed noted that market uncertainty linked to still-high inflation and geopolitical tensions continued to undermine demand both at home and abroad.
Manufacturers also reported supply-side constraints in July, with average lead times deteriorating to the greatest extent since February 2023, S&P Global said.
Smith said confidence about next year's output remains positive but sentiment is at its lowest level since May 2020.
"It seems that the Bank of Canada's recently announced second cut in interest rates could not have come soon enough as firms look to lower borrowing costs and reduced inflation to help reinvigorate demand in the coming months," he said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
08-01-24 1016ET
