TORONTO — The Canadian manufacturing sector improved in August with increases in both output and new orders, according to a report released Thursday.
The RBC Canadian Manufacturing Purchasing Managers Index increased to 54.9 from 53.1 in July, the highest reading for the index in four months.
“The Canadian manufacturing sector is showing renewed strength in August, as increases in new work and production levels also boosted employment,” RBC assistant chief economist Paul Ferley said.
“This augurs well for a rebound in manufacturing activity over the second half of this year.”
The index is based on questionnaires sent to purchasing executives at more than 400 companies across the country. Index readings above 50 signal expansion from the previous month, while below 50 indicate contraction.
The report found that incoming new work increased at the fastest pace since April while firms boosted production.
Employment in the manufacturing sector increased during August with almost 22 per cent of the firms surveyed hiring more staff, while nine per cent cut jobs.
Meanwhile, the rate of input price inflation eased to an eight-month low.
The results followed a disappointing report from Statistics Canada that the Canadian economy contracted slightly in the second quarter due to weak exports amid the global economic slowdown.
Canadian gross domestic product shrank 0.1 per cent in the three months ended June 30, or at an annualized pace of 0.4 per cent.
The agency also revised its take on the first quarter, down from an annual growth rate of 3.9 per cent to 3.6 per cent.
Economists on average had expected no growth from the Canadian economy in the second quarter as the earthquake and tsunami in Japan disrupted North American manufacturing and wildfires and maintenance work cut into oil and gas production in Alberta.
However, domestic economy in Canada remained strong and economists have said that they believe that growth will return in the third quarter and Canada will avoid slipping back into recession.