After two months of expansion, Canadian manufacturing activity contracted in March because of economic uncertainty weighing on output and new orders, offsetting easing supply pressures and rising optimism about future growth, data showed on Monday.
The PMI of S&P Global Canada Manufacturing Purchasing Managers fell to a seasonally adjusted 48.6 in March from 52.4 in February, its lowest level since June 2020.
A reading below 50 indicates a contraction in the sector.
The recovery of Canada's manufacturing economy stalled during March, with renewed falls in both production and new orders signalled, said Paul Smith, economics director at S&P Global Market Intelligence.
The negative effects of rising prices on client purchasing power and the broad macroeconomic uncertainty were key factors that weighed on market demand. The global banking sector has been stressed in recent weeks and has led to the possibility of more cautious lending that could slow the economy.
The output index fell to 48.1 from 52.2 in February and the measure of new orders was at its lowest since October, falling to 46.5 from 53.3.
The price pressures continued to fall over the month due to reports of better supply-side stability, according to Smith, despite these setbacks.
The suppliers' delivery times index went to its highest since October 2019 at 49.3, up from 46.5 in February. Firms were more optimistic about growth ahead, with the future output index climbing to its highest since April at 64.3.