Canada manufacturing PMI ekes out gain in January

Fri Feb 1, 2013 9:29am EST

* PMI rises to 50.5 in Jan from 50.4 in Dec

* Output up for first time in 3 months

* Slowest rate of job creation in 12 months

By Claire Sibonney

TORONTO, Feb 1 (Reuters) - Canadian manufacturing activity grew at a snail's pace in January, according to data released on Friday that bolstered forecasts that the country's economy will get off to a sluggish start in 2013.

The RBC Canadian Manufacturing Purchasing Managers' Index was 50.5 last month after adjusting for seasonal variation, compared with 50.4 in December, when the index matched its the weakest reading since data collection began in October 2010.

The index was still dangerously close to contraction, but held above the 50 mark that separates expansion from deterioration.

"The Canadian manufacturing sector experienced a relatively lackluster start to the new year amid ongoing global economic uncertainty," Craig Wright, chief economist at Royal Bank of Canada, said in a statement.

"As some of the more extreme downside risk scenarios look less likely now, we should see confidence in the global economy improve, paving the way for a stronger recovery in Canadian manufacturing."

Recent data suggested growth in emerging economies such as China's has picked up and fears of a collapse of the euro have been calmed by the European Central Bank. Still, market players have remained on edge about the outlook for the global economy, and whether United States, Canada's biggest trading partner, can overcome its political wrangling.

The PMI data showed output rose for the first time in three months in January, albeit only marginally, while new order growth slowed slightly.

The rate of job creation also fell to a 12-month low, and input price inflation rose at its fastest clip since September.

WEAK START TO 2013

The manufacturing figures came a day after government data showed the Canadian economy grew by a faster-than-expected 0.3 percent in November.

The GDP number strengthened the outlook for the fourth quarter of 2012, which economists had repeatedly downgraded after a relatively strong first half of last year. The Bank of Canada this month predicted annualized fourth quarter growth of 1.0 percent.

Canada performed better than most of its wealthy peers in the wake of the 2007-09 global financial crisis, leading the Bank of Canada in 2010 to become the first central bank in the Group of Seven to hike interest rates after the recession.

The bank has forecast a sluggish start to 2013, but said growth will gather momentum throughout the year as business investment and exports strengthen and temporary energy sector disruptions end. Annual growth in 2013 should be 1.9 percent, compared with the previous 2.2 percent forecast, it said.