Canadian Manufacturing Sector Expands for Fifth Month Despite Trade Tensions

Canada's manufacturing sector continued to expand in August, marking its fifth consecutive month of growth. The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) eased to 53.0 from 53.5 in July, remaining above the 50-point level that signals expansion.

Factory output increased slightly, with the output index rising to 52.8 from 52.6 in July. Employment also strengthened, with the employment index reaching 52.0, its highest level since October 2024.

Higher output and new sales supported job creation and helped improve businesses' expectations for the future. The future output index climbed to 58.7, its highest reading since December 2024.

However, concerns remain over whether the pace of expansion can continue. The latest PMI survey was largely completed before trade negotiations between Canada and the United States broke down.

The United States introduced new 50% tariffs on $20 billion of Canadian imports on August 22 after the talks between the two countries collapsed.

New export orders increased slightly to 48.2 from 48.0 in July but remained below the 50-point mark for a third consecutive month.

Input cost inflation slowed to its lowest level in four months but remained historically high. Companies cited U.S. tariffs, global supply shortages, and rising fuel and metal prices as factors affecting costs.

Tariffs and disruptions to shipping routes linked to the U.S.-Israeli war with Iran also contributed to longer delivery times for manufacturing inputs.