The Canadian manufacturing sector stays caught within the mud as the ultimate Canadian S&P International survey of producers was launched.
It’s one other smooth studying for the Canadian financial system, and the main points listed here are portray a stagflationary image that the Financial institution of Canada is not going to love.
Listed below are the main points from the S&P International Manufacturing PMI for December:
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48.6 vs 48.4 prior.
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Output Index: Declined at a faster price
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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. Happily, the patron aspect of the financial system has remained robust as manufacturing will get left behind. A yr 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 “normal air of uncertainty” that’s weighing on output for the yr forward, one thing that may hit capex
Paul Smith, Economics Director at S&P International:
“Canada’s manufacturing financial system ended the yr on a
subdued be aware, with output and new orders each falling
once more – as they’ve completed in every month of 2025 aside
from January. As soon as once more, tariffs remained an vital
theme amongst PMI survey respondents, with a normal
air of uncertainty persevering with to negatively weigh on
present and anticipated output ranges for the yr forward.
“This implies companies stay naturally cautious, and
searching for an working leanness, both when it comes to labour
capability or stock holdings. Buying exercise was
additionally lower once more in December, though supply-chain
delays proceed, and the worth of inputs shifted greater –
which companies as soon as once more intently linked to tariffs.”
This can be 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 element: Enter value inflation picked up, and promoting value inflation is at a six-month excessive. Corporations are passing these tariff prices proper alongside to shoppers.
USD/CAD is up 16 pips on the primary actual buying and selling day of 2026 after falling about 5% final yr.
Yesterday, I wrote a Canadian greenback outlook for 2026 and later at the moment I might be on BNNBloomberg TV speaking about it.
