Canada's manufacturing sector contracted for the fifth consecutive month in December as activity fell to a record low, data showed on Monday, the latest indicator that the economy may have been weaker than anticipated in the final quarter of the year. The RBC Canadian Manufacturing Purchasing Managers' Index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 47.5 in December from 48.6 in November. It was the lowest level for the survey that goes back to 2010.
A reading below 50 indicated contraction in the sector. The index fell short of that 50 threshold for nine months of the year in 2015. The Canadian economy was in a mild recession in the first half of the year and although growth resumed in the third quarter, the final quarter of 2015 got off to a weak start.
Craig Wright, chief economist at RBC, said weaker domestic demand and ongoing uncertainty in the energy sector was taking a toll on manufacturing. Measures of output, new orders and employment all fell in October. Firms cited subdued business confidence as resulting in lower spending levels and delays to new projects. One bright spot was an uptick in new export orders as firms benefited from the drop in the Canadian dollar compared to the US currency.
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