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Canadian factory activity increases at faster pace in November

TORONTO (Reuters) - Canadian manufacturing activity expanded for the fifth straight month in November as output and new orders climbed, data showed on Tuesday, but a second wave of the coronavirus pandemic could clip growth prospects over the coming months.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 55.8 in November from 55.5 in October. Since July, the PMI has been above the 50 threshold that marks expansion in the sector.

“Latest survey data shows encouraging signs at the Canadian manufacturing sector as it continues to recover from the second quarter downturn,” Shreeya Patel, an economist at IHS Markit, said in a statement.

The output index stayed solidly in expansion territory, dipping to 55.1 from 55.2 in October, which was its highest in more than two years. The measure of new orders also showed solid expansion, while the employment index rose to 52.5 from 51.2.

Canada’s national statistical agency is due to release the November labor force survey on Friday. Canada is in the middle of a second wave of the pandemic and daily cases regularly hit record highs despite increasing efforts by the 10 provinces to clamp down on businesses and curb gatherings.

“With a resurgence in case numbers, and further lockdown measures announced, the (manufacturing) sector could face softer growth prospects or a second dip in the coming months,” Patel said.

Material shortages, supplier delays and transportation restrictions linked to the pandemic led to another deterioration in vendor performance during November, IHS Markit said. The suppliers’ delivery times index fell to 34.2 from 37.4 in October.

But business confidence showed improvement, with the measure of future output rising to 62.9 from 61.4.