March 2, 2020 / 2:58 PM / a month ago

Canadian factory activity increases at fastest rate in a year

TORONTO, March 2 (Reuters) - Canadian manufacturing activity expanded in February at the quickest pace in a year, data showed on Monday, which could provide some reassurance to the Bank of Canada on the outlook for the economy ahead of an interest rate decision this week.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI), a measure of manufacturing business conditions, rose to a seasonally adjusted 51.8 in February, its highest since February, 2019, from 50.6 in January. It was the sixth straight month that the index was above the 50 threshold, showing expansion in the sector.

“February data suggested a modest improvement in new order growth across the Canadian manufacturing sector, helped by a rise in export sales for the first time in five months,” said Tim Moore, economics associate director at IHS Markit. “The gradual rebound in workloads boosted production volumes and underpinned a slight rebound in job creation.”

The new orders index rose to 51.7, its highest since October, from 51.0 in January, while the measure of output was up to 51.5 from 50.3.

Expectations that the Bank of Canada would cut interest rates as soon as Wednesday have jumped in recent days as investors worried increasingly about the economic impact of the coronavirus outbreak.

The index of suppliers’ delivery times fell to its lowest since February last year at 45.3, as supply chain disruptions grew more widespread.

“Survey respondents cited a combination of rail transport delays and reduced availability of items sourced from suppliers in China, but there were only a small number of reports that supply chain difficulties had acted as a constraint on production schedules,” Moore said.

In recent weeks, protesters have blocked railway lines in Ontario, Quebec and Alberta in solidarity with a British Columbia aboriginal band seeking to stop the construction of a gas pipeline over its land. [

Data on Friday showed that Canada’s economy barely grew in the fourth quarter. (Reporting by Fergal Smith Editing by Chizu Nomiyama)

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