Canadian factory PMI slips to four-month low in May

By Fergal Smith

TORONTO (Reuters) - Canadian manufacturing activity slowed in May, adding to a record-setting period of contraction for the sector, as output and new orders fell at a faster pace and firms reduced their buying activity, data showed on Monday.

The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) edged down to a seasonally adjusted 49.3 in May from 49.4 in April, marking its lowest level since January.

It left the PMI below the 50 threshold for the 13th straight month, the longest such stretch in data going back to October 2010. A reading below 50 marks contraction in the sector.

"Firms continue to report subdued market demand, characterised by uncertainty and a general unwillingness to commit to new business," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement. "Moreover, with sufficient stock noted at their plants, manufacturers saw little need to raise their own buying activity."

The output index fell to a five-month low of 48.3 from 49.1 in April, while the new orders measure was at 48.1, down from 48.4 and the quantity of purchases index declined to 48.3 from 49.1.

One bright spot in the data was some evidence of cooling inflation. The input price index eased to 53.8 from 54.7 in April and the measure of output prices was at 50.2, its lowest level since July 2020, down from 51.9.

"With competitive pressures and weak demand, output charges rose only fractionally and point to a more stable inflation environment. This may provide some reassurance to policymakers as they look to finally embark on their widely expected period of monetary policy loosening," Smith said.

The Bank of Canada will trim interest rates by 25 basis points to 4.75% on June 5, according to three-quarters of economists in a Reuters poll which showed three further cuts this year.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)