The RBC Canadian Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 53.9 in December from 55.3 the month before.
It was the lowest level in three months. A reading above 50 shows growth in the sector.
The report indicated some moderation in the pace of improvement in December, said Paul Ferley, assistant chief economist at RBC.
"Despite the recent fluctuation in commodity prices, particularly for oil, we continue to be constructive on the overall economic environment in Canada, including exports, which should mean good things for manufacturing going forward," Ferley said.
The measure of new orders declined to 53.9 from 56.2, hurt by a slower pace of growth for new export orders.
The employment gauge fell to the lowest since June at 52.9, though anecdotal evidence suggested companies hired more workers in response to higher business requirements, the report said.
