Canada December manufacturing index edges higher but remains below 50 for 11th month

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 mushy studying for the Canadian economic system, and the small print listed below are portray a stagflationary image that the Financial institution of Canada is not going to love.

Listed here are the small print from the S&P International Manufacturing PMI for December:

• 48.6 vs 48.4 prior.

• Output Index: Declined at a faster price

• New Orders with a ‘solid decline’

• Employment: eleventh consecutive month of job shedding.

• 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 economic system has remained sturdy as manufacturing will get left behind. A yr of extended uncertainty round USMCA negotiations is not going to assist.

Companies reported that common lead instances lengthened due to customs delays, particularly with US imports. Even worse, the uncertainty round commerce coverage is inflicting a “basic air of uncertainty” that’s weighing on output for the yr forward, one thing that can hit capex

Paul Smith, Economics Director at S&P International:

“Canada’s manufacturing economic system ended the yr on a
subdued notice, with output and new orders each falling
once more – as they’ve performed in every month of 2025 aside
from January. As soon as once more, tariffs remained an essential
theme amongst PMI survey respondents, with a basic
air of uncertainty persevering with to negatively weigh on
present and anticipated output ranges for the yr forward.

“This implies corporations stay naturally cautious, and
in search of an working leanness, both when it comes to labour
capability or stock holdings. Buying exercise was
additionally reduce once more in December, though supply-chain
delays proceed, and the worth of inputs shifted greater –
which corporations 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 approach down. Usually, that might 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. Companies are passing these tariff prices proper alongside to shoppers.