Canada factory sector posts longest slowdown in 7 years

Workers make jackets at the Canada Goose factory in Toronto
Workers make jackets at the Canada Goose factory in Toronto, Ontario, Canada, February 23, 2018. REUTERS/Mark Blinch

TORONTO, Jan 3 (Reuters) - Canadian manufacturing activity contracted at a slightly faster rate in December as an uncertain economic outlook and high inflation undercut demand, while the recent trend of easing cost pressures reversed, data showed on Tuesday.

The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) fell to a seasonally adjusted 49.2 in December from 49.6 in November.

It was the fifth straight month that the index was below the 50 threshold that marks contraction in the sector. That's the longest sequence of declines since a seven-month stretch from August 2015 to February 2016, S&P Global said.

"The Canadian manufacturing economy turned in another relatively subdued performance as 2022 closed," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

"Firms reported again that weak market demand reflected both ongoing uncertainty and the negative impact of high inflation."

The output index fell to a four-month low of 47.1 from 49.0 in November, while the measure of new orders edged up only slightly to 47.0 from 46.8.

Purchasing activity was the weakest since June 2020 as firms looked to reduce existing inventory. Still, the average lead times for the delivery of inputs continued to deteriorate.

"With supply constraints persisting, price stickiness remains a concern for companies," Smith said.

After declining for five straight months, the input price index was higher in December, rising to 61.5 from 60.9 in the prior month. The measure of output prices also rose.

Reporting by Fergal Smith; Editing by Chizu Nomiyama

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