Canada manufacturing growth hits 26-month low as hiring slows

Workers are seen at at Bri-Steel Manufacturing, a manufacturer and distributer of seamless steel pipes, in Edmonton, Alberta, Canada, June 21, 2018. Picture taken June 21, 2018. REUTERS/Candace Elliott

TORONTO (Reuters) - Canada's manufacturing sector expanded in February at the slowest pace in more than two years as muted growth in new business diminished the rate of job gains, data showed on Friday.

The Markit Canada Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 52.6 last month, its lowest since December 2016, from 53.0 in January. A reading above 50 shows growth in the sector.

"Canadian manufacturers experienced a slowdown in overall business conditions during February, with weaker employment growth the main factor weighing on the headline PMI reading," said Christian Buhagiar, president and CEO at Supply Chain Management Association (SCMA).

The measure of employment fell to its lowest since January 2017 at 53.7 from 55.4 in January, as manufacturers reported that softer client demand in recent months and tight labor market conditions had held back employment growth at their plants, IHS Markit said.

"Production growth was relatively subdued, reflecting a sustained soft patch for incoming new work so far this year," Buhagiar said. "Survey respondents noted that trade frictions and heightened global economic uncertainty had led to delayed decision-making among clients on new orders."

Measures of production and new business volumes edged higher but held near their lowest in more than two years.

The output index rose to 52.0 from 51.9 in January, while the new orders index was up to 52.3 from 51.4.

On a positive note, there was evidence of reduced pressure on supply chains as the suppliers' delivery times index edged up to 45.1 from 44.5 in January.

But the stock of purchases index dropped to 49.9 from 52.0, the first time since October 2017 that inventories contracted.

(Reporting by Fergal Smith, Editing by Chizu Nomiyama;; +1 416 941 8113)