Strong Demand Bolsters Canadian Factory Activity In May

Canadian manufacturing activity expanded at a faster pace in May as firms raised output to meet strong demand for their goods and inflation pressures showed some signs of easing, data showed on Wednesday.

The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) rose to a seasonally adjusted 56.8 in May from 56.2 in April. A reading above 50 shows growth in the sector.

"Canada's manufacturing sector has recovered well from the pandemic, registering output growth in almost every month for the last two years," Shreeya Patel, an economist at S&P Global, said in a statement.

The output index rose to 55.6 from 54.8 in April, helped by greater client demand amid easing pandemic restrictions, while workforces expanded at the fastest pace since December 2020 and the index measuring the quantity of input purchases notched a survey-record high.

"Demand continues to flourish while firms are committed to growing their businesses through a variety of different ventures ... As a result, companies have struggled to keep up with demand, though severe labour and material shortages can also be blamed," Patel said.

Inflation pressures, which have soared globally this year, weighed on firms' optimism but measures of input and output prices both fell.