The Canadian manufacturing sector remains stuck in the mud as the final Canadian S&P Global survey of manufacturers was released.
It’s another soft reading for the Canadian economy, and the details here are painting a stagflationary picture that the Bank of Canada isn’t going to like.
Here are the details from the S&P Global Manufacturing PMI for December:
-
48.6 vs 48.4 prior.
-
Output Index: Declined at a quicker rate
-
New Orders with a ‘solid decline’
-
Employment: 11th consecutive month of job shedding.
-
Prices: Selling price inflation hit a six-month high.
The report explicitly blames tariffs for driving up prices while simultaneously killing demand. Fortunately, the consumer side of the economy has remained strong as manufacturing gets left behind. A year of prolonged uncertainty around USMCA negotiations isn’t going to help.
Firms reported that average lead times lengthened because of customs delays, specifically with US imports. Even worse, the uncertainty around trade policy is causing a “general air of uncertainty” that is weighing on output for the year ahead, something that will hit capex
Paul Smith, Economics Director at S&P Global:
“Canada’s manufacturing economy ended the year on a
subdued note, with output and new orders both falling
again – as they have done in each month of 2025 apart
from January. Once again, tariffs remained an important
theme amongst PMI survey respondents, with a general
air of uncertainty continuing to negatively weigh on
current and expected output levels for the year ahead.
“This means firms remain naturally cautious, and
seeking an operating leanness, either in terms of labour
capacity or inventory holdings. Purchasing activity was
also cut again in December, although supply-chain
delays continue, and the price of inputs shifted higher –
which firms once again closely linked to tariffs.”
This is a reminder that there are problems in Canadian manufacturing as this survey has been in contraction for 11 straight months, shedding jobs the whole way down. Normally, that would scream for more cuts but look at the inflation component: Input price inflation picked up, and selling price inflation is at a six-month high
