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Canada RBC manufacturing PMI shows slower growth

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The pace of Canadian manufacturing growth slowed for the first time in four months in October, as new export orders fell modestly amid a deteriorating global economy, data on Tuesday showed.

The RBC Canadian Manufacturing Purchasing Managers' Index came in at 53.66 in October, above the level of 50 that separates expansion from contraction.

The index, launched this year by Royal Bank of Canada and produced by research firm Markit, fell from 55.05 in September and showed the weakest reading in three months.

General business conditions continued to improve, however, as both output and new orders increasing solidly, albeit at a lower rate. In fact, the PMI has marked improvement in every month since the survey started in October 2010.

"The Canadian manufacturing sector has been weathering external macro events and market conditions reasonably well, and we expect to see modest economic growth for the remainder of the year," said Craig Wright, chief economist at Royal Bank of Canada.

"It is encouraging to see the RBC PMI holding its ground, particularly in light of softening manufacturing conditions in other corners of the globe."

The modest decline in new export orders snapped a three-month period of growth and marked the softest reading in that category since the index began.

Survey respondents commented that foreign clients had postponed orders as the global economic picture dimmed.

The Bank of Canada said recently that the country's export-dependent economy has been hit by troubles in the United States and Europe, which are both weaker than they had been following previous recessions.

Data on Monday showed August GDP picked up 0.3 percent from July, suggesting the economy will avoid recession but that growth will be sluggish.

The PMI survey recorded higher input costs, driven by fuel and raw materials such as metals, though overall price inflation slowed further from April's peak.

That alleviates some pressure on manufacturers' cost burdens, noted Cheryl Paradowski, CEO of the Purchasing Management Association of Canada, which helps source the data.

Employment in Canada's manufacturing sector rose further during the latest survey period, albeit at a slower rate than September. Twenty-two percent of survey respondents created jobs in October, while 14 percent cut staff.

U.S. MANUFACTURING SLOWS

The pace of growth in the U.S. manufacturing sector unexpectedly slowed in October, in line with trends in China and Britain in data reported on Tuesday.

The Institute for Supply Management said its index of national factory activity dipped to 50.8 from 51.6 the month before, coming in below forecasts for an improvement to 52.0, according to a Reuters poll of economists.

A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.

New orders rose to 52.4 from 49.6, while the prices paid index fell to its lowest since April 2009 at 41.0 from 56.0. The employment index eased to 53.5 from 53.8.

"There is no question that manufacturing activity has slowed a bit in response to the weakness that we are seeing out of Europe," said Mark Vitner, senior economist at Wells Fargo Securities in Charlotte, North Carolina.

"What this report really highlights is that the economy is really still stuck in slow growth mode and we are unlikely to shake that any time soon."

The slowdown in the U.S. manufacturing sector followed data on Tuesday showing similar trends in Canada, Britain and China suggesting the pace of economic growth is continuing to slow.

Factory activity in Asia's big export economies slowed to its weakest rate in nearly three years in October, while a sharp decline in British manufacturing provided the latest sign that Europe is on the brink of recession.

"We're starting to see a broader slowdown globally. You had global activity moving along at a reasonable pace but that's starting to fade," said Tom Porcelli, chief economist at RBC Capital Markets in New York.

In other U.S. data on Tuesday, growth in U.S. construction spending slowed in September as governments cut back on building and maintaining schools and public transportation, a government report showed.

Total construction spending rose 0.2 percent to an annual rate of $787.21 billion, the Commerce Department said.

Economists polled by Reuters had forecast a 0.3 percent increase after August construction spending rose by an upwardly revised 1.6 percent.

Spending on public construction fell 0.6 percent in September, with cuts felt across government departments from healthcare and schools to public safety and conservation.

Federal spending dropped 6.8 percent, its steepest decline since December of last year. State and local outlays edged up 0.1 percent.

In the private sector, construction spending rose 0.6 percent, with residential spending up 0.9 percent and nonresidential spending up 0.3 percent.

Total construction spending was down 1.3 percent from September of last year, hurt by a 9.2-percent decline in public sector outlays. Private spending was up 3.9 percent on the year.

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