By Robb M. Stewart

Canadian manufacturing activity picked up last month, moving closer to stabilizing with softer declines in output and new orders, data showed Friday.

The S&P Global Canada manufacturing purchasing managers index advanced to 49.7 in February from 48.3 the month before. The measure has remained below the 50 threshold that separates expansion from contraction for 10 consecutive months, though the latest decline was the slowest in that period.

"Although continuing to decline, reflective of some ongoing client hesitancy, rates of contraction were small in the context of recent months and reflect a steady underlying improvement in global market conditions," Paul Smith, economics director at S&P Global Market Intelligence, said.

Smith said surveyed manufacturers expressed optimism about the future, adding to staffing for the first time in three months.

S&P Global said production for the month was down slightly, and the latest decline in orders modest, though there remained many reports that client demand was subdued that there was a reluctance to commit to new contracts. International sales declined for a sixth month in a row.

Latest data showed a 19th successive monthly fall in purchasing activity, though it was modest, and there remained a preference among some firms to use inventories wherever possible, as highlighted by a further drop in stocks of purchases. S&P Global said several panelists signaled a reticence to purchase new inputs given elevated prices, which rose again in February.

The data showed that backlogs of work declined for a 19th straight month, though to the slowest degree for a year, and extra capacity helped companies to clear work outstanding.

Employment growth, though marginal, was due to positive output expectations, S&P Global said.

Bank of Canada policymaker are set to decide on interest rates next week, though economists widely anticipate the policy rate will be held at a more than two-decade high of 5% for a fifth meeting in a row. Annual inflation decelerated to 2.9% in January, continuing a steady decline toward the midpoint of the central bank's 1% to 3% target, though hiring activity picked up for the month and wage remains elevated, and the housing market has shown signs of picking up in recent months.

Canada's economy recovered in the last quarter, managing annualized growth of 1% following a slight contraction in the third quarter, as a rise in exports more than made up for weakness in business investment.

Write to Robb M. Stewart at

(END) Dow Jones Newswires

03-01-24 1008ET