- Highest reading since June 2022
- Fourth straight month of expansion
- Input prices rise at fastest pace in four years
- New export orders down for a second month
- Business confidence falls to lowest since March
Canada’s manufacturing sector enjoyed its strongest performance since June 2022 in the latest PMI from S&P Global.
Output and new orders both accelerated, and employment rose for a fourth consecutive month.
It seems to be a domestic story. New export orders declined for a second month running, with panellists again pointing to tariffs and the Middle East war as drags on international demand. The internal market is holding up despite the loonie near a four-year low.
The inflation picture is the uncomfortable part. Input prices rose at the fastest pace in four years, extending an upward trend in place since late 2025. Companies flagged energy, transportation and steel as the core drivers, with tariffs and the Middle East conflict as root causes. Canada is steadily excluding imported steel. Manufacturers passed it along too — output charges rose strongly and well above trend, though below May’s near four-year high. Vendor delivery times deteriorated considerably again, and there were signs firms are buying ahead to build stocks, with inventories rising at the steepest pace since the end of 2024.
Despite the solid headline, confidence in the outlook fell to a four-month low and sits well below trend. S&P’s Paul Smith summed it up: the current picture is positive, but whether growth can be sustained “at its current clip is doubtful” with international demand weak and prices rising rapidly.
For the Bank of Canada, it’s a low-tier but notable release. It shows four straight months of expansion and a four-year high in input costs. That’s not going to quiet the rate-hike talk.
These are the comments from Paul Smith, Economics Director at S&P Global Market Intelligence:
“PMI data for July painted a positive picture of current growth, with output and new orders both rising at faster rates on the back of firmer domestic demand. Companies were suitably encouraged to take on additional workers, raising their staffing levels to bolster capacity and help support current workloads.
“However, whether growth can be sustained at its current clip is doubtful. International demand remains weak, driven lower by tariffs and a highly uncertain geopolitical environment. These factors also continued to push up prices rapidly whilst adding to ongoing and widespread supply-side disruption. Subsequently, confidence amongst firms in the outlook and therefore near-term growth prospects – remains subdued, with sentiment in July its lowest for four months and well below trend.”
