* PMI falls to 49.3 in March from 51.7 in February
* First contraction since data series started in 2010
* New orders slip, pushing output down; job growth slows
By Alastair Sharp
TORONTO, April 2 Canada suffered a surprising
contraction in manufacturing activity in March, according to
data released on Tuesday, suggesting the economy has not yet
shaken off the slowdown it suffered in late 2012.
The RBC Canadian Manufacturing Purchasing Managers' Index
was at 49.3 last month after adjusting for seasonal variation,
down from 51.7 in February. A reading above 50 represents
expansion, while a number below 50 means contraction.
It was the first contraction since data collection for the
indicator began in October 2010.
"The deterioration in the Canadian manufacturing measure is
surprising in the face of improving growth in both the U.S. and
various emerging economies," Royal Bank of Canada's chief
economist, Craig Wright, said in a statement accompanying the
"This weak spot should be short-lived, however, as we expect
that global demand for Canadian exports will recover, providing
a welcome boost for domestic manufacturers."
Recent data has reinforced the view that the U.S. economy is
perking up, although it still appears vulnerable to fiscal
austerity measures that kicked in early in the year.
The RBC manufacturing report showed output and new orders
fell to the lowest levels in the indicator's history, while
input prices remained stubbornly high, with a rise in raw
material prices and an unfavorable exchange rate blamed for the
The Canadian dollar weakened significantly in February and
only pared some of those losses in March, making it more costly
for Canadian factories to import raw goods but aiding exports of
"The Canadian manufacturing sector took a turn for the worse
in March," Cheryl Paradowski, who heads the Purchasing
Management Association of Canada, said in a statement.
She added that weak demand both domestically and in major
export markets weighed on output and pushed many manufacturers
to scale back hiring.
Overall employment in the sector notched higher, but the
rate of growth was more subdued than in previous months, and
Alberta and British Columbia recorded job losses.
Those Western Canadian provinces also suffered the sharpest
falls in production and a moderate deterioration in overall
Alberta's finance minister told Reuters on Wednesday that
the province's economy was growing and would continue to do so.
Last week, Statistics Canada said gross domestic product
bounced back in January after a year-end slump, thanks in part
to a comeback in manufacturing, while inflation also rose.
But economists remain skeptical about the central bank's
projection of 2.3 percent GDP growth in the first quarter after
ending 2012 with the weakest six months since the 2008-09