Canada Manufacturing Activity Picks Up With Sector PMI Rising to 53.3 in April

By Robb M. Stewart

Canadian manufacturing activity recovered last month, with data pointing to increases in production and purchasing as demand was spurred by fears of increased prices.

The S&P Global Canada manufacturing purchasing managers index rose to 53.3 in April after slipping back down to 50 the month before. The index has now been above the 50 threshold that splits expansion and contraction three times in the past four months, following an extended stretch of decline amid heightened uncertainty in the wake of U.S. tariffs.

A reading of 53.3 would ordinarily be celebrated, especially after underperformance by manufacturers since the pandemic, but S&P Global Market Intelligence Economics Director Paul Smith said April's number should be treated with caution.

"Output and, especially, new orders surged since March, but growth appears to be driven by worry rather than any meaningful or permanent uplift in demand," Smith said.

He said anecdotal evidence pointed toward companies building up stocks due to worries about future product availability and price rises, which he said is due to the war in the Middle East and the spike in energy prices and the associated supply shock. That, Smith said, is leading to a scramble to secure inventories and lock in prices with suppliers.

S&P Global's survey showed lengthening delivery times and input costs increasing at a rate not seen since the post-pandemic related price surges of 2022. There also were signs increased costs are being passed along to customers, with output price inflation picking up to its strongest since late 2022.

Signs of price inflation are likely to catch the attention of the central bank.

Canada's economy returned to growth in the first quarter of the year, though it has yet to fully recover from the disruption to global trade caused by U.S. protectionist policies and tariffs. Statistics Canada estimated industry-level gross domestic product was flat in March, which after growing 0.2% month-over-month in February puts the economy on track for annualized growth of 1.7% for the quarter after shrinking slightly at the end of 2025.

The Bank of Canada this week again left its policy interest rate unchanged. It has forecast growth of about 1.2% over the course of the year, though its governing council is watching closely the fallout from the Iran war and remains wary of heightened uncertainty in the country ahead of the renegotiation this year of the existing trade pact between Canada, the U.S. and Mexico.

S&P Global's manufacturing poll found production growth last month was the strongest since May 2022. The rise in new work was the greatest in more than four years, and the data showed that new export orders rose at the fastest pace since the start of 2022.

The pickup in new orders led some manufacturers to expand production capacity in April, and staffing levels overall rose for the third time in the past four months, albeit marginally as some manufacturers chose not to replace leavers, S&P Global said.

Input prices overall rose by the greatest degree in more than three-and-a-half years, with fuel and freight transportation costs driven substantially higher by the Middle East conflict and with manufacturers again pointing to the impact of tariffs, the survey found.

Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

05-01-26 1019ET