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Canadian manufacturing activity increases at a record pace in December

TORONTO (Reuters) - Canadian factory activity expanded at its fastest pace on record in December as new orders and production climbed, while manufacturers grew more optimistic that output would continue to rise in 2021, data showed on Monday.

The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) rose to a seasonally adjusted 57.9 in December from 55.8 in November, the sixth straight month that the PMI was above the 50 threshold that marks expansion in the sector.

It was the highest level for the index since the survey began in October 2010.

The data "indicated the Canadian manufacturing sector concluded 2020 with a record month-on-month improvement in business conditions," Shreeya Patel, an economist at IHS Markit, said in a statement. "New orders and output supported the latest rise with robust increases registered."

Demand conditions continued to improve in both domestic and foreign markets, said IHS Markit, adding that the rise in new work from abroad was attributed by purchasing managers to rising demand from clients in the U.S. and Asia.

Increased manufacturing workloads contributed to the strongest job creation in over two years, IHS Markit said. Less encouraging was mounting capacity and supply chain pressures, with the latter often linked by manufacturers to coronavirus-related restrictions.

"Relatively high virus case numbers still pose a threat to the industry should restrictions tighten again," said Patel.

A number of Canadian provinces have announced tighter economic restrictions as a second wave of coronavirus sweeps across Canada.

Still, the data showed that Canadian manufacturers remain upbeat about their prospects for growth over the next 12 months. The measure of future output rose to a three-month high of 64.1 from 62.9 in November.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)