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GM workers use human assistance automation to weld vehicle doors at an assembly plant in Oshawa, Ont., on March 19, 2021.Nathan Denette/The Canadian Press

Canadian factory activity grew at the slowest pace in four months in June as material shortages persisted and inflation pressures rose, but the rate of expansion remained vigorous, data showed on Friday.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) dipped to a seasonally adjusted 56.5 in June from 57.0 in May. It was the lowest reading since February but holding well above the 50 threshold which shows growth in the sector.

The data “continued to highlight a robust expansion,” Shreeya Patel, an economist at IHS Markit, said in a statement.

“A record uptick in preproduction inventory holdings suggests firms are gearing up for another busy quarter while a rise in backlogs could see job creation continue,” Ms. Patel added.

The measure of preproduction inventories rose to the highest in data going back to October, 2010, at 54.4 from 52.3 in May, while the backlogs of work index was above 50 for the 11th straight month.

Difficulty sourcing skilled workers and material shortages were reported by firms as factors delaying production, IHS Markit said.

Global supply chains have been stretched during the COVID-19 pandemic, with the reopening of some major economies adding to the stress.

After a harsh third wave of the virus, Canadian provinces have begun easing restrictions on activity in recent weeks.

Costs rose with the input price index matching May’s reading for the highest since August, 2018.

“Price pressures continued to mount in June ... firms will hope that material availability improves over the course of the year,” Ms. Patel said.

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