Tariffs cause sharpest decline in Canadian mfg. output and orders since COVID-19: S&P Global PMI
Plant Magazine
Business Operations Economy Manufacturingariffs have also led to more supply delays and historically high input costs, prompting firms to increase output charges.
Canada’s manufacturing sector experienced its most challenging month in nearly five years this April, according to the latest data from S&P Global. The sector saw declines in output and new orders, marking the sharpest falls since the height of the COVID-19 pandemic. This downturn is largely attributed to tariffs and unpredictable U.S. trade policies, which have heavily impacted the industry.
The S&P Global Canada Manufacturing Purchasing Managers’ Index™ (PMI®) fell to 45.3 in April, down from 46.3 in March. This marks the third consecutive month of deteriorating operating conditions, with the index remaining below the crucial 50.0 no-change mark. The April reading is the lowest since May 2020, reflecting severe contractions in production and new orders.
Manufacturers reported significant job losses and reductions in purchasing and inventories due to the uncertain outlook. Tariffs have also led to more supply delays and historically high input costs, prompting firms to increase output charges.
The primary drivers of the low PMI reading were steep reductions in both production and new orders, with contractions being the sharpest since May 2020. Firms noted the impact of tariffs and uncertainty over U.S. trade policy, particularly affecting investment goods producers.
New export orders were significantly impacted by tariffs, showing the greatest reduction in exports in five years. The uncertainty over U.S. trade policy has led to hesitancy and delays in decision-making among clients.
Manufacturers reduced staffing levels for the third consecutive month in April, although capacity remained sufficient to manage overall workloads. This was evidenced by the steepest reduction in backlogs of existing orders since May 2020.
Supply-side delays were also apparent, with firms recording the steepest reduction in purchasing activity since May 2020. Tariffs led to higher input prices, especially for metals like aluminum and steel, encouraging firms to raise their output charges despite easing inflation since March.
Confidence among manufacturers regarding the year ahead remained subdued overall, with U.S. trade policy contributing to an uncertain outlook. However, some firms are hopeful for a more stable economic and political environment in the coming year, which has helped confidence rebound to a three-month high.
Firms were keen to reduce excess stocks, cutting both inputs and finished goods inventories during the survey period. Cost considerations and the uncertain outlook were instrumental in stock management decisions, with firms adjusting inventories in line with current and expected production levels.
Commenting on the latest survey results, Paul Smith, Economics Director at S&P Global Market Intelligence said: “The Canadian manufacturing sector had another difficult month in April, with output and new orders declining at rates not seen since the height of the global COVID-19 pandemic in 2020. The uncertainty regarding the future direction and implementation of tariffs was again especially damaging, with markets characterised by hesitancy and delayed decision making. Indeed, reflective of the unpredictable environment firms are operating in, capital goods producers again reported especially steep falls in output and new work.
“Tariff impacts were again also evident in price and supply developments. Firms reported delays at ports and at customs points, which led to a further lengthening of supplier delivery times despite a noticeable reduction in demand for manufacturing inputs. Prices also rose steeply, especially for metals products.
“Whilst some firms are hopeful of a more settled economic and political environment in a year’s time, the outlook remains especially uncertain with the unpredictable direction of trade protectionism policies again weighing heavily on confidence in April.”
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