Canada manufacturing PMI posts first decline in 6 months

Wed Aug 1, 2012 9:30am EDT

* PMI falls to 53.05 in July from 54.85 in June

* Index declines for first time since Jan

* Pace of new export order growth falls sharply

* Slowing global growth hurts demand

* Input prices reading lowest in survey's 22-mth history

By Jon Cook

TORONTO, Aug 1 (Reuters) - Canadian manufacturing growth slowed sharply in July, with output and new order gains well down from June, as deteriorating global economic conditions cooled factory activity in Canada.

The RBC Canadian Manufacturing Purchasing Managers' Index, released on Wednesday, slipped to 53.05 in July from 54.85 a month earlier. It was the index's first decline in six months and weakest reading since hitting 52.43 in March.

The manufacturing gauge, however, remained above the 50-point mark that separates expansion from contraction.

"Canada's manufacturing sector continued to grow in July, albeit at a slower pace, suggesting global growth worries are weighing on the economy," Craig Wright, chief economist at Royal Bank of Canada, said in a statement.

The RBC report comes on the heels of Statistics Canada data on Tuesday that showed Canada's economy grew by a less-than-expected 0.1 percent in May from April, hurt by unexpected weakness in the manufacturing sector.

Demand for Canadian exports has been hurt by slowing growth in the United States - its largest trading partner - as well as China and Europe.

The RBC PMI data revealed both output and new orders among manufacturers significantly lagged June totals, slipping to their lowest levels in four months. Slumping demand from abroad was a key contributor, with the index of new export orders falling more than four points.

European debt turmoil and a choppy U.S. recovery have forced the Bank of Canada to keep its main policy rate at 1 percent for nearly two years now.

Canadian manufacturers also suffered from a surging Canadian dollar in July, which climbed within striking distance of parity versus the U.S. currency after hitting a 2012 low in June.

The RBC report showed manufacturing employment in Canada increased for the sixth successive month in July. However the jobs component of the broader index slipped to 54.1 from 54.62 in June -- showing hiring growth slowed.

Input prices also fell in July for the first time since the survey began in October 2010, as respondents reported lower prices for raw materials. Meanwhile, output charges rose for the fourth consecutive month.

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