Canadian manufacturing activity increased at a faster pace in October as production and employment picked up in anticipation of rising orders, data showed on Friday.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) rose to 51.1 in October from 50.4 in September, its highest level since February, 2023.
The reading in September marked the first move above the 50.0 no-change mark in 17 months. A reading above 50 indicates expansion in the sector.
“October marked a relatively positive month for Canada’s manufacturing economy, with solid increases in output and employment both stand-out statistics from the latest survey data,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“Firms bolstered their production in anticipation of growth in the months ahead, with warehouse inventories increasing marginally ahead of expected order gains.”
The output index rose to 52.2 from 49.8 in September, ending a 14-month run of contractions, while employment was at 52.1, its highest level since April, 2023.
“With latest data also pointing to a dissipation of inflationary pressures, the survey overall provides further support to the Bank of Canada’s current focus on moving quickly towards a more neutral monetary policy stance,” Mr. Smith said.
The input price index dipped to 55.8 from 56.4 in September, while the measure of output prices was at 50.4, down from 51.4.
The Bank of Canada estimates the neutral interest rate – the level that neither restricts nor stimulates the economy – to be in a 2.25-per-cent to 3.25-per-cent range. The Canadian central bank has cut its benchmark rate by one and a quarter percentage points to 3.75 per cent since June.
On Tuesday, Bank of Canada Governor Tiff Macklem said the central bank is starting to see the impact of lower borrowing costs on the economy.