Canadian factory activity grows at a slower pace in October

TORONTO, Nov 2 (Reuters) - Canadian manufacturing activity expanded for the fourth straight month in October as the sector continued to recover from the coronavirus crisis, with output climbing at the fastest pace in over two years, data showed on Monday.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) fell to a seasonally adjusted 55.5 in October, pulling back from its highest level in more than two years in September at 56.0. Since July, the PMI has been above the 50 threshold that indicates expansion in the sector.

“October data suggests another improvement in the health of the Canadian manufacturing sector,” Shreeya Patel, an economist at IHS Markit, said in a statement. “New orders and output have increased sharply with firms remaining optimistic that production will improve over the course of the year.”

The measure of output rose to its highest since August 2018 at 55.2 from 54.9 in September, helped by stronger client demand and additional workforce numbers. The employment index was 51.2, dipping from 54.3.

Still, manufacturers said that insufficient staffing numbers and delays in the receipt of materials from suppliers had led to the accumulation of incomplete work. The backlogs of work index rose to 54.6, its highest since June 2018, from 51.1 September.

Higher backlogs highlight capacity pressures at Canadian manufacturers but “will help sustain the recovery in output through the winter should new orders drop off,” Patel said.

The recent reintroduction of some measures to contain the coronavirus pandemic is expected to weigh on economic activity in the near-term, the Bank of Canada said last week. (Reporting by Fergal Smith Editing by Chizu Nomiyama)