Warm weather fails to heat up cold manufacturing sector: RBC report

OTTAWA - A fresh survey on Canada's manufacturing industry suggests warmer weather is not yet having the desired effect of heating up the sector.

After a winter setback caused by harsh weather, the RBC manufacturing purchasing manager's index slid to 52.2 in May, down from 52.9 the previous month and 53.3 in March.

While still north of 50, which indicates growth, it was the lowest reading since January.

RBC economist Paul Ferley called the second consecutive moderation in the PMI index disappointing, although he said the return to more seasonal temperatures and improvements in the U.S. outlook should lift activity in Canada's manufacturing sector going forward.

And the news isn't any better south of the border. The U.S. manufacturing index also slid in May to 53.2, from 54.9 in April.

There was one encouraging indicator in the Canadian report — the pace of hiring in the sector edged up four-tenths of a point to 52.4.

Still, the good news in Canada's economy of late appears to be based mostly on future expectations.

Most key economic indicators have been tepid, flat or falling.

Employment fell by nearly 30,000 jobs in April, and on Friday, Statistics Canada reported the economy shrank to 1.2 per cent growth in the first quarter — less than half the speed in the previous three-month period.

Analysts believe the Bank of Canada will need to maintain a dovish stance on interest rates this week, given that the economy still has yet to achieve a sustainable and robust growth track.