Canadian factory activity expands at fastest pace in eight months

FILE PHOTO: Worker loads part for welding in robot bay at Alfield Industries, a subsidiary of Martinrea, one of three global auto parts makers in Canada, in Vaughan, Ontario, Canada April 28, 2017. REUTERS/Fred Thornhill

TORONTO (Reuters) - Canadian manufacturing activity expanded in October for the second consecutive month as new orders climbed, which could temper concern at the Bank of Canada about the potential for global trade conflicts to derail the domestic economy.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 51.2 in October, its highest level since February, from 51.0 in September. A reading above 50 shows expansion in the sector.

“October’s survey data indicates a change of fortunes for the Canadian manufacturing sector, with output growth hitting an eight-month high in response to improving order books,” said Tim Moore, economics associate director at IHS Markit.

The new orders index rose to the highest level since February, at 51.8 from 50.7 in September. The measure of output also notched an eight-month high, rising to 51.1 from 50.2, but was softer than the long-run average for the survey.

“Rising domestic demand has underpinned the gradual recovery in new work since the summer, but export sales remain relatively sluggish against a backdrop of weaker global trade conditions,” Moore said.

The index for new export orders slipped into contraction, at 49.0 from 50.4 in September, with manufacturers pointing to intense competitive pressures.

On Wednesday, the Bank of Canada said the country’s economy will “be increasingly tested” by trade uncertainty as it left its benchmark interest rate on hold at 1.75%.

The employment measure continued to show expansion but fell to 51.2 from 52.1.

Reporting by Fergal Smith; Editing by Chizu Nomiyama