TORONTO (Reuters) -Canada’s manufacturing sector contracted for a sixth straight month in July as tariffs undercut trade with the United States and spurred firms to reduce inventory as well as staffing levels, data on Friday showed.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) edged up to 46.1 in July from 45.6 in June but remained well below the 50 no-change threshold.
A level below 50 indicates contraction in the sector. The PMI has posted sub-50 readings since February.
“Canada’s manufacturing sector continued to struggle in the face of tariffs during July, with output, new orders and buying activity all declining at noticeable rates – albeit to lesser degrees than seen in recent months,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“Unsurprisingly, it was again trade with the United States that remained especially challenging, with firms noting reduced demand and sales volumes from US-based clients.”
The new orders index rose to 44.2 from 43.5 in June, while the measure of new export orders was at 41.9, up from 40.2.
The U.S. is set to increase tariffs on Canadian goods not covered by a continental trade pact to 35% if the two countries do not reach a trade agreement by August 1. Canada sends about 75% of its exports to the United States.
“For companies facing a hugely unpredictable business environment, it has become increasingly important to run operations as lean as possible,” Smith said. “And such considerations inevitably led to further cuts to both employment and purchasing activity.”
The stocks of purchases index fell to 44.1 from 44.6 in June, posting its lowest level since May 2020, as firms sought to run down their inventory levels, while the employment index was at 46.2, down from 46.7.
One silver lining was reduced input cost inflation. The input price index fell to its lowest since November, at 57.0 from 61.4 in June.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama )
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