Canadian factory PMI falls in April as downturn hits one year

By Fergal Smith

TORONTO (Reuters) - Canadian manufacturing activity slowed in April, extending a lengthy period of contraction for the sector, as output and new orders fell at an accelerated pace and inflation pressures picked up, data showed on Wednesday.

The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) fell to a seasonally adjusted 49.4 in April from 49.8 in March, staying below the 50 threshold for the 12th straight month, the longest such stretch in data going back to October 2010.

A reading below 50 marks contraction in the sector.

"April's survey data revealed another relatively subdued performance of Canada's manufacturing sector, with both output and new orders both falling since March – and perhaps most disappointedly at slightly faster rates," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

The output index fell to 49.1 from 49.7 in March and the new orders measure was at 48.4, down from 49.4.

The measure of future output rose to 61.9 from 60.8 as firms retained confidence that production would rise from current levels, but the improvement in sentiment was held in check by elevated borrowing costs.

The Bank of Canada has held its benchmark interest rate at a 22-year high of 5% since July. It says that rates would most likely only come down gradually given the risks to the inflation outlook.

"Inflation rates are also frustratingly sticky, with supply-side delays noted as a factor pushing up input costs," Smith said.

The input prices index rose to 54.7, its highest level since November, from 54.2 in March. The measure of output prices also climbed but its move was constrained by competitive market pressures.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)