RBC says manufacturing index stagnant in December, but sees improvements ahead

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TORONTO - Royal Bank of Canada (TSX:RY) says the Canadian manufacturing sector was stagnant in December, but there's reason for optimism ahead.

The bank says its Canadian Manufacturing Purchasing Managers' Index was flat last month at 50.4.

"A weak global economy and a strong loonie have weighed somewhat on the broader sector and contributed to a flat PMI reading compared to November," said RBC chief economist Craig Wright.

"That said, as the cloak of uncertainty is removed from the global economy in the coming months related to fiscal policy in the U.S. and elsewhere, we expect that demand for Canadian exports will rise, as will investment and hiring across the economy."

The survey painted a gloomier picture for the entire fourth quarter, during which the index averaged 50.7. That's the lowest quarterly reading since data collection began in October 2010 and a drop from the average index of 52.8 during the third quarter.

The survey said new orders increased in December partly due to greater demand and new product launches, but output levels hadn't changed from November.

Although employment continued to increase, the rate of job creation was at an 11-month low.

The survey found manufacturing business conditions improved in Alberta, British Columbia and Ontario in December. Those provinces also saw job creation, while job losses were reported elsewhere in the country.

RBC conducted the survey in association with Markit, a global financial information services company, and the Purchasing Management Association of Canada.