By Robb M. Stewart
The downturn in Canadian manufacturing activity deepened last month, with data released Tuesday showing sharp drops in output and new orders and a return to job cutting.
The S&P Global Canada manufacturing purchasing managers index fell to 45.4 in December from 47.7 the month before, marking an eighth straight month below the 50 threshold that separates expansion from contraction. The latest reading was the lowest for the index since May 2020.
"Canada's manufacturing economy endured a difficult end to 2023 and with that rounded off a challenging year for the sector overall," said Paul Smith, economics director at S&P Global Market Intelligence.
Manufacturing the final month of last year was in contraction territory for a ninth month in 2023, as declines in production and new orders accelerated amid reports that demand for manufactured goods remains subdued, Smith said.
The declines in output and new orders for the month were also the steepest since May 2020 and reflected weak market conditions, with firms surveyed pointing to high prices that were weighing heavily on demand in Canada and abroad, S&P Global said. The data showed that new export orders declined to the greatest degree for three-and-a-half years, with various conflicts around the world also cited as negatively impacting global manufacturing demand.
S&P Global said companies remained cautious about purchasing and employment decisions in December, with cuts to both. Firms signaled a strong preference for using existing stocks in production against the backdrop of weak order book trends, with the drop in input inventories in December the steepest for three and a half years, It said. Job numbers fell by the most since June 2020, and S&P Global said several panelists in its survey noted an unwillingness to replace people leaving their jobs at a time of deteriorating order books, as well as excess capacity that was highlighted by another steep reduction in backlogs of work.
Industry-level gross domestic product, a broad measure of the goods and services produced across the economy, was essentially unchanged for a second straight month in August from the month before, and advance information points to the economy remaining stagnant in September, data released this week by Statistics Canada showed.
In December, The Bank of Canada for a third straight policy meeting held its benchmark interest rate steady at a more-than-two-decade high of 5%, and noted the economy was expected to remain weak in the final quarter of last year as high rates continue to hold back spending. Annual inflation held steady at 3.1% in November, still ahead of the central bank's 2% target.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
01-02-24 1012ET
