Canada’s RBC PMI Lower than Expected

There was a decline in the most recent RBC Markit Canadian manufacturing PMI index figures as it fell from 51.9 reported in July to 51.1 for the month August, this was its lowest reading in six months. Despite the fact that the figures still signify expansion, its shortcomings will spur disappointment in the market, mostly due to the slump in export orders in the current month.

There was also a weakening in the production component to the least level for 6 months as a progressive slowing in new orders Demand was weak both at home and abroad. New orders declined to 50.5 from 51.5, while export orders remained in contraction territory, though the gauge was able to edge up to 49.4 from 48.4. Companies cited strong competition for new work, as well as subdued demand conditions that weighed in on the employment outlook, which fell to 50.9 from 52.4.

The figures show “Canada’s manufacturing sector continues to struggle for momentum,” said Tim Moore, senior economist at survey compilers IHS Markit.

There have been worrying developments in export trend as they also posted another contraction in orders for the current month, but the drop was however minimal. Employment releases posted some uptick for the month as jobs grew for the sixth consecutive month, it was also the biggest gain since March as fears for the outlook led to a pull back for inflation plans. The re-stocking of inventories was largely held back by strong signs of caution  as inventories of finished goods continued to decline, there was also an increase in delivery times resulting from capacity constraints.

Canada’s economy contracted at its worst pace in seven years in the second quarter, data showed on Wednesday, though economists and policy makers still expect to see a rebound in the second half of the year.

In the Asian session, at GMT 03:00, the pair is trading at 1.3085, with the USD trading 0.1% lower against the CAD from yesterday’s close. The pair is expected to find support at 1.3060, and a fall through could take it to the next support level of 1.3034. The pair is expected to find its first resistance at 1.3129, and a rise through could take it to the next resistance level of 1.3172.

Moving ahead, investors will look forward to Canada’s international merchandise trade data for July, scheduled to release later in the day. The currency pair is trading below its 20 Hour and 50 Hour moving averages.