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While the rate of improvement in business conditions lost some momentum in August, Canada's manufacturing industry continued to show signs of modest growth with firms taking on more workers, spurred by further business expansion and rising production, according to the IHS Markit Canada Manufacturing Purchasing Managers' Index (PMI).

The headline seasonally adjusted IHS Markit PMI registered 54.6 in August, above the neutral 50.0 threshold for the eighteenth consecutive month. Although down slightly from 55.5 in July, the index signalled a rate of improvement that remained above the long-run series average.

“The latest PMI data pointed to a slight moderation in the overall rate of growth of the Canadian manufacturing sector.," says Alex Gill, economist at survey compilers IHS Markit. "The slowdown largely reflected weaker rises in output and new orders, which in turn led to a softer expansion in purchasing activity. Nonetheless, growth rates remained impressive and above their respective long-run averages. “Manufacturers remained firmly optimistic that the resurgence in output growth seen so far in 2017 would be maintained over the coming 12 months. This, combined with robust client demand, contributed to the sharpest round of job creation in the series history, thereby providing a strong indication that the renaissance in the Canadian manufacturing sector has far from run its course.”

Central to the latest overall improvement was an eleventh successive monthly expansion in new orders. Although the weakest recorded in 2017 so far, the rate of growth remained strong and above the long-run series average. New export order growth meanwhile weakened from the previous month and was only modest.

Firms responded to rising workloads by hiring additional staff members for the eleventh successive month. Moreover, the latest round of job creation was the most marked since data collection began in October 2010. This contributed to a fall in unfinished work, thereby ending a four-month period of backlog accumulation.

Demand for raw materials among manufacturers continued to strengthen, albeit at the weakest pace since May. Pre-production inventories, however, stagnated after five months of growth.

Manufacturers’ sentiment towards future output remained firmly positive in August amid upbeat sales forecasts, according to the report.

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