OTTAWA: Activity in Canada's manufacturing sector contracted last month to its lowest level on record as business confidence was hit by sharply cheaper oil prices, data showed on Monday.
The RBC Canadian Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 48.7 in February from 51.0 in January.
It was the lowest level since the survey began in 2010 and only the second time it has fallen below the 50 level that indicates growth in the sector.
The last time it was below 50 was in March 2013. Oil is a major export for Canada and the recent plunge in crude prices has started to be felt in the economy. The price collapse also spurred an interest surprise rate cut from the central bank in January.
The survey "reflects the hit to confidence from the oil price shock with the weakness most evident in the energy intensive regions of the country," said Craig Wright, chief economist at RBC.
Still, a weaker Canadian dollar and stronger US economy should lift sentiment over time, he said.
The output subindex fell to 48.2 from 51.8 as manufacturers lowered their production due to weaker client spending.
A number of companies cited lower demand from clients in the oil and gas sector, the report said.
The new orders component fell to 48.1 from 51.0, while employment shrank for a second month in a row to 47.2 from 49.4. New export orders also suffered, falling to 47.2 from 50.1.
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