Key facts
- Canada's manufacturing sector saw its fastest expansion in over four years in July.
- The S&P Global Canada Manufacturing PMI reached 53.5, up from 53.0 in June.
- Stronger domestic demand boosted production and new orders.
- Input prices increased significantly, reaching their highest level since July 2022.
- Weak international demand and geopolitical uncertainty cast doubt on future growth sustainability.
Canada's manufacturing sector experienced its strongest growth in over four years in July, with the S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) rising to 53.5 from 53.0 in June. This marks the seventh consecutive month of expansion, indicating a robust domestic demand environment that fueled increases in production and new orders.
Companies responded to the stronger demand by expanding their workforce to bolster capacity. However, the sustainability of this growth is questioned due to persistent weakness in international demand, exacerbated by tariffs and a volatile geopolitical landscape. The U.S. recently imposed new tariffs on Canadian goods, contributing to rising costs.
Input prices surged to their highest level since July 2022, driven by tariffs and higher energy costs linked to Middle East conflicts. This inflationary pressure, coupled with geopolitical uncertainties, weighed on business confidence, causing the future output index to dip to its lowest point since March.