Canadian factory activity resumes expansion in July as economy reopens

FILE PHOTO: Shipping containers are picture in St John's, Newfoundland and Labrador, Canada, October 17, 2018. REUTERS/Chris Wattie

TORONTO (Reuters) - Canadian manufacturing activity expanded in July for the first time in five months as reopening of more parts of the domestic economy boosted output and new orders, data showed on Tuesday.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 52.9 in July from 47.8 in June, extending its recovery from 33.0 in April when businesses were closed to help contain the coronavirus pandemic.

It was the first time since February that the index was above the 50 threshold, indicating expansion in the sector, and the highest reading since January 2019.

“July data highlights a partial rebound in the Canadian manufacturing sector after the steep downturn seen during the second quarter of 2020,” said Tim Moore, economics director at IHS Markit, in a statement.

The output index climbed to its highest level since September 2018 at 53.8 from 45.5 in June and the new orders index was up at 51.7 from 45.5, but the measure of export sales remained in contraction, rising to 47.8 from 43.6.

Canada sends about 75% of its exports to the United States, where coronavirus infections have been rising in recent weeks.

“Reports from survey respondents suggested that concerns about the global economic outlook and a second wave of the pandemic had curtailed growth projections for some manufacturers in the latest survey period,” Moore said.

The employment index rose to 50.9 from 44.8 in June. Canada’s jobs report for July is due on Friday.

Reporting by Fergal Smith