Canadian factory activity expands at slowest pace in four months

TORONTO (Reuters) - Canadian manufacturing activity expanded in December at its slowest pace in four months as new orders declined and business optimism weakened, data showed on Thursday.

The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI), a measure of manufacturing business conditions, fell to a seasonally adjusted 50.4 in December, its lowest level since August, from 51.4 in November. A reading above 50 shows expansion in the sector.

"December data revealed a disappointing end to 2019 for the Canadian manufacturing sector as the steady recovery in production volumes stalled, while new orders fell back into decline," said Tim Moore, economics associate director at IHS Markit.

The new orders index fell into contraction for the first time since August, dropping to 49.5 from 51.6 in November. Survey respondents pointed to subdued demand across the automotive and energy sectors, as well as difficulties winning new work in U.S. markets.

The four-month low for the PMI follows recent data showing that Canada's economy unexpectedly shrank by 0.1% in October and shed more than 70,000 jobs in November.

The PMI's employment index fell to 51.0 from 51.4 in November, while the measure of future output declined to 61.0, its lowest level since February 2016, from 62.3.

"It appears that manufacturers are braced for a lack of new work to replace completed projects in the New Year, with business optimism now at its lowest for almost four years and job creation moving closer to stagnation in the latest survey period," Moore said.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)