TORONTO, April 1 (Reuters) - The pace of growth in the Canadian manufacturing sector picked up in March as new orders increased, data showed on Tuesday, though input costs were at the highest level in almost three years due to a weaker Canadian dollar.
The RBC Canadian Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 53.3 last month from 52.9 in February. A reading above 50 shows growth in the sector.
It was the highest level since December, while the forward-looking new orders index rose to 53.4 from 52.6.
"We continue to expect that underlying economic conditions - a strengthening U.S. economy and a weaker Canadian dollar - will lay the foundation for a boost in domestic manufacturing in the near term," Craig Wright, chief economist at Royal Bank of Canada, said in a statement.
A measure of employment grew only slightly, edging up to 50.8 from 50.4. That comes ahead of the more comprehensive labor market report due at the end of the week, which is expected to show hiring rebounded in March after the economy shed jobs the month before.
Input prices rose to 68.2 from 65.1, the fourth month in a row of increases and the highest level since May 2011. Higher input costs were overwhelmingly linked to the weakening of the Canadian dollar, the report said.
Still, new export orders rose to 52.4 from 50.7, suggesting a solid increase in demand from abroad.
The Canadian dollar has dropped sharply in recent months, hit by a number of factors, including a more dovish shift in tone from the Bank of Canada. (Reporting by Leah Schnurr; Editing by Peter Galloway)