By Fergal Smith

TORONTO, June 2 (Reuters) - Canadian manufacturing activity contracted for a fourth straight month in May as trade uncertainty led to firms shedding workers at the fastest pace since shortly after the start of the COVID-19 pandemic, data on Monday showed.

The S&P Global Canada Manufacturing Purchasing Managers' Index $(PMI.UK)$ edged up to 46.1 in May from 45.3 in April but was stuck below the 50 no-change level for the fourth straight month. A reading below 50 indicates contraction in the sector.

“With manufacturers continuing to be hit by tariffs and trade uncertainty, May saw the sector experience a further significant contraction," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

"The hard to predict nature of trade policies means the outlook for production remains extremely uncertain and given the recent scale of the downturn in the sector, job losses are mounting."

The employment component fell to 44.9 from 47.6 in April, marking the lowest level since June 2020, while measures of output and new orders also remained in contraction.

Canada sends about 75% of its exports to the United States, including steel, aluminum and autos which have been hit with hefty U.S. duties. Retaliatory tariffs have been imposed on some U.S. goods.

“Unsurprisingly, tariffs remain the primary source of price pressures, whilst also leading to an intensification of supply side delays," Smith said.

The measure of input prices rose to 63.5 from 62.1 in April, leaving it just below the 31-month peak it touched in March, while the average lead times for the delivery of inputs lengthened for an 11th straight month. The deterioration in vendor performance was linked to port congestion and challenges at customs.

The Future Output Index edged up to 50.9 from 50.4 in April, with some firms hopeful that government policies could help stabilize the macroeconomic environment, but was well below the survey's historical norm, S&P Global said.

Canadian Prime Minister Mark Carney, whose Liberal Party retained power in an April election, has proposed sweeping changes to boost economic growth.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)

((fergal.smith@thomsonreuters.com; +1 647 480 7446))