Canada's Manufacturing Sector Contracts 2.1% Amid Tariff Uncertainty
1min read Canada's manufacturing sector experienced a significant contraction in April, with the Purchasing Managers' Index (PMI) falling to its lowest point in nearly five years. The s&p global Canada Manufacturing PMI declined from 46.3 in March to 45.3, indicating the highest rate of contraction since the onset of the COVID-19 pandemic. A reading below 50 signifies a contraction in the sector.
The economic director at S&P Global Market Intelligence, noted that the uncertainty surrounding future tariffs and their implementation has caused significant damage. The market is characterized by hesitation and delayed decision-making. Capital goods manufacturers reported a sharp decline in production and new orders, reflecting the unpredictable environment in which businesses are operating.
The output index fell from 45.7 in March to 42.7, while the new orders index stood at 41.2, down from 42.3 in the previous month. Approximately 75% of Canada's exports, including steel, aluminum, and automobiles, are sent to the United States, all of which have been impacted by high U.S. tariffs. Canada has also imposed retaliatory tariffs on certain U.S. goods.
The Bank of Canada has warned that a prolonged global trade war could trigger a severe economic recession in Canada, potentially pushing inflation rates temporarily above 3%. The input prices index remains at historically high levels, with the average lead time for input deliveries worsening for the tenth consecutive month.
Companies reported delays at ports and customs, which, despite a noticeable decrease in demand for manufacturing inputs, have led to further extensions in supplier delivery times. Prices have also surged, particularly for metal products.
Looking ahead, the future output index rose from 45.1 in March to 50.4, as some companies hope for a more stable market environment in a year. However, this index still reflects low confidence levels. The overall sentiment indicates that while there is some optimism, the current environment remains challenging for Canadian manufacturers.
Ask Aime: "Canada's manufacturing sector faces its steepest decline since COVID-19, with PMI at a five-year low."
