By Ketki Saxena
investing.com -- In May, the manufacturing sector in Canada experienced a slowdown due to high inflation and inventory reduction affecting customer demand. However, this decline in activity has, on a positive note, contributed to some relief from supply pressures, according to recent data.
The seasonally adjusted S&P Global (NYSE:SPGI) Canada Manufacturing Purchasing Managers' Index (PMI) dropped to 49.0 in May, down from April's reading of 50.2. A PMI score below 50 signifies contraction within the industry, which has been fluctuating around that mark for several months now.
"A weak underlying demand profile weighed on the Canadian manufacturing sector during May, with production dropping since April and purchasing activity cut," said Paul Smith, Economics Director at S&P Global Market Intelligence.
The new orders index dipped to 48.6 from April's figure of 49.0 as companies reported that heightened inflation had strained client budgets while spending was reduced to lower inventory levels.
Both input stocks and purchasing activity measures displayed contractions for a tenth consecutive month.
Smith noted that decreased purchasing activity "has had some further positive impact on supply chains." He added that "with the challenges related to the pandemic now principally unwound, lead times improved for the first time in nearly four years."
"Whilst there remain some residual output price increases still being recorded in the sector it feels that inflation challenges in manufacturing are now coming to an end."
The suppliers' delivery times index climbed up to 50.9 from April's 49.6, marking its first venture above the 50 threshold since August 2019. Meanwhile, the input prices index revealed a drop in prices for the first time since July 2012.