RBC Purchasing Managers’ Index in contraction territory in February

TORONTO – A gauge of the Canadian manufacturing industry indicates the sector fell into contraction in February, coming in at its lowest level since the monthly survey began more than four years ago.

The RBC Canadian Manufacturing Purchasing Managers’ Index reading was a seasonally adjusted 48.7 last month, down from 51.0 in January and ending a 21-month period of sustained expansion.

Any number below 50.0 indicates contraction.

Themonthly survey is conducted in association with Markit, a leading global financial information services company, and the Supply Chain Management Association.

RBC said Monday the survey highlights falling volumes of incoming new work and employment numbers across the sector.

Softer demand patterns also contributed to more cautious inventory policies and lower input buying in February.

The results, the lowest since the survey began in October 2010, signalled “a moderate deterioration in overall business conditions across the manufacturing sector,” the bank said.

“February’s data reflects the hit to confidence from the oil price shock with the weakness most evident in the energy intensive regions of the country,” RBC chief economist Craig Wright said.

“Over time we expect the weaker Canadian dollar and stronger U.S. economy to turn sentiment higher.”

The headline RBC PMI reflects changes in output, new orders, employment, inventories and supplier delivery times.

Among key findings of February survey: manufacturing PMI was at lowest level in almost 4 1/2 years, output, new orders and employment all decreased and a weaker exchange rate for the Canadian dollar led to “robust and accelerated” input cost inflation.