By Fergal Smith
TORONTO (Reuters) - Canadian manufacturing activity contracted in March after two months of expansion as economic uncertainty weighed on output and new orders, offsetting easing supply pressures as well as rising optimism about future growth, data showed on Monday.
The S&P Global (NYSE:SPGI) Canada Manufacturing Purchasing Managers' Index (PMI) fell to a seasonally adjusted 48.6 in March from 52.4 in February, its lowest level since June 2020.
A reading below 50 indicates contraction in the sector.
"The recovery of Canada's manufacturing economy stalled during March, with renewed falls in both production and new orders signalled," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
"Broader macroeconomic uncertainty, and the negative impact of rising prices on client purchasing power were key factors that weighed on market demand."
Stress in the global banking sector in recent weeks has led to the possibility of more cautious lending that could slow the economy.
The output index fell to 48.1 from 52.2 in February and the measure of new orders was at its lowest since October, falling to 46.5 from 53.3.
"Despite these setbacks, there were some positive news to take from the survey, namely that price pressures continued to fall over the month amid reports of better supply-side stability," Smith said.
The suppliers' delivery times index rose to its highest since October 2019 at 49.3, up from 46.5 in February, while firms were more optimistic about growth ahead, with the future output index climbing to its highest since April at 64.3.