A worker drives a cleaning machine at a Hitachi Energy plant that produces large-scale transformers, in Varennes, Que.Roger LeMoyne/The Globe and Mail
Canada’s manufacturing sector expanded for a fifth straight month in August as output and employment rose but the recent increase in trade tensions between the U.S. and Canada cast doubt on the pace of growth being sustained.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) edged down to 53.0 last month from 53.5 in July. The index has been above the 50 mark since April – a reading above 50 indicates expansion in the sector.
“Canada’s manufacturing sector continued to enjoy growth in August, with output and new sales rising solidly, which helped to support job creation and provide a boost in optimism about the future,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
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The output index edged up to 52.8 from 52.6 in July, while the employment measure was at 52.0, its highest level since October, 2024.
“However, given the latest survey was mostly conducted before the recent collapse of trade negotiations with the U.S., we may have already seen a high-water mark for growth,” Smith said.
The U.S. imposed new 50-per-cent tariffs on $28-billion of Canadian imports on Aug. 22 after talks between the two countries collapsed.
The new export orders index increased to 48.2 from 48.0 in July but remained below the 50 threshold for the third straight month.
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The measure of input cost inflation eased to a four-month low but remained historically elevated. Firms pointed to the impact of U.S. tariffs and global supply shortages, as well as higher prices for fuel and metals.
Tariffs and the adverse impact of the U.S.-Israeli war with Iran on shipping routes contributed to considerable lengthening in average lead times for the delivery of inputs, S&P Global said.
Still, firms grew more optimistic about the outlook. The future output index rose to 58.7, its highest level since December, 2024.