Canada’s manufacturing sector continued to shrink in September, with the downturn worsening due to weak demand and ongoing trade uncertainty.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) fell to 47.7 in September from 48.3 in August, marking the eighth consecutive month below the 50 level that signals contraction.
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“Canada’s manufacturing economy continues to underperform,” said Paul Smith, economics director at S&P Global Market Intelligence. “Output, new orders, and exports all declined further, pushing companies to cut back on purchases, reduce inventories, and scale down employment.”
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Key measures within the report also fell:
- Output index dropped to 46.4 (from 47.4)
- New orders index fell to 46.1 (from 47.9)
The weakness comes amid stalled trade talks with the U.S., where Canada has been seeking to eliminate tariffs and strengthen economic ties. Prime Minister Mark Carney said that negotiations are ongoing but many issues will likely be addressed during the next USMCA review.
One positive note from the report is the continued easing of price pressures.
- Input costs rose at a slower pace (index fell to 57.3 from 61.6)
- Output prices hit their lowest level since October 2024 (at 51.2)
This trend supports the Bank of Canada’s recent decision to lower its benchmark interest rate by 25 basis points to 2.50%—its first rate cut since March. Policymakers may take comfort in the sign that inflationary pressures are easing.
Still, with weak demand, falling exports, and a lack of progress on trade deals, the outlook for Canada’s manufacturing sector remains challenging.
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