TORONTO—Canada’s manufacturing sector is still feeling the impact of the oil and gas downturn but there are signs of improvement in Ontario, which is benefitting from a weaker dollar and brighter prospects for the U.S. market, according to feedback from the industry’s purchasing managers.
The RBC Canadian Manufacturing index registered 49.8 in May—the fourth month in a row for the national index to register below 50, which marks the midpoint between positive and negative opinion, the Royal Bank reported Monday.
RBC says confidence has risen in Ontario (rising to 55.5 from 54.0 in May). The index remained very weak in the Alberta-British Columbia region at 43.2 in May, up from 42.0 in April, but the regional indexes for other parts of the country are in positive territory and there are signs the upward momentum will continue with the help of a strong U.S. dollar.
Cheryl Paradowski, president and CEO of the Supply Chain Management Association, which represents purchasing managers, said Ontario’s manufacturing sector’s outlook is getting a lift from a low Canadian dollar.
“I think there was a lag from the drop in the exchange rate to actually feeling it and seeing its way into some of the improvements that we’re starting to see now,” Paradowski said.
RBC chief economist Craig Wright said that, despite Friday’s downward revision of the U.S. government’s estimate of first-quarter gross domestic product, other economic data from more recent periods suggest a recovery is underway.
In addition, Wright says the Royal Bank estimates the Canadian dollar could fall to about 77 cents US by the end of this year as the U.S. currency strengthens.
The loonie is currently hovering around 80 cents U.S., down from about 85 cents at the beginning of this year and more than 90 cents a year ago.