Manufacturing Conditions Deteriorate

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    The March RBC Canadian Manufacturing ‘Purchasing Managers’ Index’ saw its first deterioration in manufacturing business conditions since data collection began in October 2010, with monthly declines reported for both output and new orders. The headline composite indicator ‒ designed to provide a single-figure snapshot of the health of the manufacturing sector ‒ fell below the 50 no-change mark that separates growth from contraction in March. This was the first sub-50 reading in the 2½-year survey history. At 49.3, down from 51.7 in February, this was consistent with a marginal rate of contraction in March. Both the levels of output and new orders were lower in March compared with one month previously. A number of firms linked this to weak client demand. “The deterioration in the Canadian manufacturing measure is surprising in the face of improving growth in both the U.S. and various emerging economies. However, uncertainty about resolving fiscal imbalances in the U.S. ‒ with sequestration going ahead March 1 ‒ and in the Euro-area may have weighed on sentiment,” says Craig Wright, senior vice-president and chief economist, RBC. “This weak spot should be short-lived, however, as we expect that global demand for Canadian exports will recover, providing a welcome boost for domestic manufacturers.”