By Alastair Sharp
TORONTO (Reuters) - Canada's manufacturing activity eked out the smallest of expansions in April after shrinking in March but the sector did see an encouraging rise in new orders from abroad, according to data released on Wednesday.
The RBC Canadian Manufacturing Purchasing Managers' Index was at 50.1 last month after adjusting for seasonal variation, up from 49.3 in March. A reading above 50 represents expansion, while a number below means contraction.
The manufacturing data, based on a survey of about 400 companies, offers one of the earliest indicators of the pace of economic growth.
"Canada's manufacturing sector kept its head above water in April, registering some improvement over the surprising series low recorded last month," RBC's chief economist, Craig Wright, said in a statement accompanying the data release.
"While the overall gains made in April were tepid, we expect manufacturing output to pick up, augmenting export activity and supporting Canada's growth prospects," he said.
Canada's economy recorded its weakest six months since the 2008-09 recession at the end of 2012, but has since notched surprising 0.3 percent growth in gross domestic product for both January and February.
Many of the RBC PMI sub-readings for April were little changed from the prior month, with output improving but still under the neutral 50 mark and employment growth slipping.
Cost burdens rose at their weakest rate since July 2012, while factories raised their output prices by more.
But factory owners did report their strongest rate of growth in new export orders in six months, which was generally attributed to winning business in the United States. Inventories of finished goods increased for the first time in 2013.
"A return to growth for new orders, partly reflecting a modest rise in new export work, may lead to an increase in production over the coming months," Cheryl Paradowski, chief executive of the Purchasing Management Association of Canada, said in a statement.
"In the meantime, manufacturers' profitability is protected to some extent by output charges rising at a faster rate than input costs," she said.
Regionally, weakness was reported in Alberta and British Columbia, and Ontario, while Quebec notched gains in output, net export work, and employment.
Monthly gross domestic product data for February released on Tuesday by Statistics Canada showed 0.3 percent expansion on the back of strength in potash mining, oil and gas, and manufacturing.
The hard-hit manufacturing sector continued to recover with 0.8 percent growth, the government agency said.
(Editing by Jeffrey Hodgson and James Dalgleish)