The Canadian manufacturing sector stays caught within the mud as the ultimate Canadian S&P World survey of producers was launched.
It’s one other gentle studying for the Canadian economic system, and the small print listed here are portray a stagflationary image that the Financial institution of Canada is not going to love.
Listed below are the small print from the S&P World Manufacturing PMI for December:
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48.6 vs 48.4 prior.
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Output Index: Declined at a faster fee
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New Orders with a ‘solid decline’
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Employment: eleventh consecutive month of job shedding.
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Costs: Promoting value inflation hit a six-month excessive.
The report explicitly blames tariffs for driving up costs whereas concurrently killing demand. Thankfully, the buyer facet of the economic system has remained robust as manufacturing will get left behind. A 12 months of extended uncertainty round USMCA negotiations is not going to assist.
Corporations reported that common lead instances lengthened due to customs delays, particularly with US imports. Even worse, the uncertainty round commerce coverage is inflicting a “common air of uncertainty” that’s weighing on output for the 12 months forward, one thing that may hit capex
Paul Smith, Economics Director at S&P World:
“Canada’s manufacturing economic system ended the 12 months on a
subdued notice, with output and new orders each falling
once more – as they’ve executed in every month of 2025 aside
from January. As soon as once more, tariffs remained an vital
theme amongst PMI survey respondents, with a common
air of uncertainty persevering with to negatively weigh on
present and anticipated output ranges for the 12 months forward.
“This implies corporations stay naturally cautious, and
looking for an working leanness, both by way of labour
capability or stock holdings. Buying exercise was
additionally reduce once more in December, though supply-chain
delays proceed, and the value of inputs shifted greater –
which corporations as soon as once more intently linked to tariffs.”
It is a reminder that there are issues in Canadian manufacturing as this survey has been in contraction for 11 straight months, shedding jobs the entire method down. Usually, that may scream for extra cuts however take a look at the inflation part: Enter value inflation picked up, and promoting value inflation is at a six-month excessive. Corporations are passing these tariff prices proper alongside to customers.
USD/CAD is up 16 pips on the primary actual buying and selling day of 2026 after falling about 5% final 12 months.
Yesterday, I wrote a Canadian greenback outlook for 2026 and later right now I will probably be on BNNBloomberg TV speaking about it.
