Canada’s manufacturing industry remained in contraction during August, marking the seventh consecutive month of decline, as manufacturers continued to face subdued export demand, particularly from the United States, along with ongoing logistical and cost pressures, according to data released Tuesday.
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Despite the continued downturn, the sector showed signs of recovery compared to previous months. The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) rose to 48.3 in August from 46.1 in July — the highest reading since January, when it reached 51.6. A PMI reading below 50 indicates a contraction in activity.
“Canada’s manufacturing economy continued to struggle in the face of tariffs and uncertainty in August although, somewhat positively, to a noticeably lesser degree than earlier in the year,” said Paul Smith, Economics Director at S&P Global Market Intelligence.
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While still in decline, key indicators such as output, new orders, and employment fell at slower rates compared to July. The new orders index improved to 47.9 in August from 44.2 in July, and new export orders rose to 44.8 from 41.9. Manufacturers continued to attribute weak performance to reduced demand from U.S. clients — Canada’s main export destination.
Recent GDP data also showed the Canadian economy contracted by 1.6% in the second quarter, with a sharp 7.5% decline in exports. However, domestic demand remained relatively resilient, according to Statistics Canada.
The index for stocks of purchases climbed to 46.3 from 44.1, and the employment index improved slightly to 47.6 from 46.2. Still, overall employment in the sector fell for a seventh straight month, with reductions stemming from layoffs and unfilled vacancies.
Meanwhile, inflationary pressures intensified. The input price index — which measures the cost of materials and other inputs — jumped to 61.6 in August, up from 57.0 in July.
“Hopefully, the manufacturing economy will continue this broad underlying path towards stabilization, but the outlook remains extremely uncertain,” Smith added.
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