UPDATE 1-Canada June manufacturing PMI shows slower growth

Mon Jul 4, 2011 9:40am EDT

* PMI falls to 52.8 in June from 54.8 in May

* Index down for third month

* Export orders decline

* Second publication of new factory index

By Claire Sibonney

TORONTO, July 4 (Reuters) - The pace of Canadian manufacturing activity growth fell for a third straight month in June as both production and new order volumes slowed, according to data released on Monday.

The RBC Canadian Manufacturing Purchasing Managers' Index, launched last month and produced by research firm Markit, fell to 52.8 in June from 54.8 in May.

The latest reading was above the level of 50 that separates growth from contraction, and signaled that overall business conditions are still modestly improving.

The PMI is produced with input from the Purchasing Management Association of Canada. Data collection from some 400 companies, small and large, began in October 2010.

Business conditions within the Canadian manufacturing sector did slightly better in June. This reflected new order and output growth, although both weakened since May.

"The moderation is consistent with the trends we are seeing around the globe pointing to a temporary soft patch in the economic recovery," Craig Wright, chief economist at Royal Bank of Canada, said in statement.

Wright noted the weakness was spread broadly across all of the survey components and across the Canadian regions.

New export business fell during the latest survey period, with firms attributing the decrease to soft global demand and a strong Canadian dollar. The currency has traded above the one-for-one level with the U.S. dollar since February.

The report showed employment in the manufacturing sector increased for the ninth successive month in June. However, the pace of job creation slowed since the previous survey period to a seven-month low.

On the bright side, the rate of input price inflation slowed to a six-month low in June, even as fuel and other oil-related prices rose.

Canada's manufacturing sector has often dragged on the country's economic recovery. Export-reliant manufacturers have struggled with tepid U.S. demand and a strong domestic currency, which has made their goods more expensive in foreign markets.

"New work intakes from abroad fell during the latest survey period, as the global economy showed further signs of weakness," Cheryl Paradowski, chief executive at the Purchasing Management Association of Canada (PMAC), said in a statement.

Data on Thursday showed Canada's manufacturing production fell 0.7 percent in April following a robust 1.6 percent increase in March, with most of the weakness stemming from the auto sector. [ID:nN1E75T0ER] (Editing by Jeffrey Hodgson)

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