Canadian Factory Sector Growth Jumps to Two-Year High in August

People walk in the Eaton Centre shopping mall, as the provincial phase 2 of reopening from COVID-19 restrictions begins in Toronto on June 24, 2020. (REUTERS/Carlos Osorio/File Photo)

TORONTO—Canadian manufacturing activity accelerated in August to its fastest pace in two years, adding to evidence of a rapid rebound in the domestic economy as businesses reopen following coronavirus-related disruptions, data showed on Tuesday.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 55.1 in August, its highest level since the same month two years ago, from 52.9 in July. A reading above 50 indicates expansion in the sector.

In April, when many businesses were closed to help contain the coronavirus pandemic, the index slumped to a record low of 33.0.

The data “highlighted a strong upturn in the Canadian manufacturing industry, continuing the recovery from the severe second quarter downturn,” Shreeya Patel, an economist at IHS Markit, said in a statement.

“Production and order book volumes both expanded at the fastest pace in two years, driven by the reopening of client businesses and improvements in customer demand,” Patel said.

On Friday, a flash estimate from Statistics Canada showed that Canada’s gross domestic product increased 3 percent in July, edging economic activity closer to pre-pandemic levels.

The PMI’s measure of new export orders showed that foreign demand for Canadian goods expanded for the first time in six months, while the employment index climbed to its highest level since January 2019.

On a more cautious note, IHS Markit said that transportation delays, reduced staff and pandemic restrictions contributed to one of the steepest deteriorations in supplier performance since the start of the survey and input price inflation accelerated to a 19-month high.

Reporting by Fergal Smith