Canadian manufacturing activity picked up pace for a third straight month in September, boosted by both output and new orders, data released on Monday showed, offering hope the economy will avert another recession.
The RBC Canadian Manufacturing Purchasing Managers' Index, launched this year by Royal Bank of Canada and produced by research firm Markit, rose to 55.05 in September from 54.9 in August.
The climb above the level of 50 that separates expansion from contraction signaled a general improvement in business conditions.
The index reading was the highest in five months as manufacturers stepped up production and new order growth quickened to its fastest rate since April.
"Today's RBC PMI figures bode well for a rebound in the Canadian manufacturing sector in the third quarter, consistent with a rebound in the Canadian economy and in line with our latest forecast for real GDP growth in Canada of 2.4 percent this year," said Craig Wright, chief economist at Royal Bank of Canada.
Data on Friday echoed optimism for the start of the third quarter amid fears that the economy could slip back into recession by the end of the year.
The Canadian economy grew for a second straight month in July after shrinking during the second quarter as a whole, with manufacturing posting its first gain in four months.
Meanwhile, the PMI report showed the rate of job creation was also robust and the fastest since March.
Almost 21 per cent of firms added to their workforce due to higher workloads, while 11 per cent cut jobs.
However, supply-side pressures continued to build during the latest survey period, as firms reported further vendor delivery delays and a strong - albeit slower - rate of input price inflation.
Companies surveyed attributed the overall increase in new orders to greater demand including exports and new client wins.
The PMI is produced with input from the Purchasing Management Association of Canada. Data collection from about 400 companies, big and small, began in October 2010.