Canada Manufacturing Sector PMI Slips Into Contraction Territory at 49.6 in October

By Robb M. Stewart

Canadian manufacturers are struggling under the weight of tariffs and broader uncertainty, with activity squeezed last month by a decline in output and the sharpest drop in new orders in more than a year, data showed Monday.

The S&P Global Canada manufacturing purchasing managers index retreated in October to 49.6, a third straight monthly decline and the first time so far this year below the 50 threshold between expansion and contraction following a fall to 51.5 in September.

"Having enjoyed an uninterrupted run of solid growth throughout 2026 so far, Canada's manufacturing sector ran out of steam in October, recording a marginal deterioration in operating conditions overall," said Paul Smith, economics director at S&P Global Market Intelligence.

Both production and new orders were down for the month to reflect a broad deterioration in operating conditions, and manufacturers saw intensified price pressures with inflation underpinned by tariffs plus ongoing trade disruptions from the Iran war and artificial intelligence-related demand, Smith said.

Output fell for the first time since March, and the overall level of new work contracted by the most in over a year as companies reported uncertainty among clients caused by the impact of tariffs on demand and new work, S&P Global's survey showed. It found this was especially the case for trade with the U.S., and new export orders declined for a fifth consecutive month and by the most since January.

Economic growth has cooled in recent months, and an early estimate of activity indicates gross domestic product contracted 0.1% in September from the month before. Following essentially no change in GDP for a second straight month in August, that puts the economy on track for annualized growth of about 1.3% in the third quarter, shy of the about 2% pace the Bank of Canada has forecast.

The advance look at September GDP showed decreases in manufacturing and oil and gas extraction, partially offset by increases in utilities and wholesale trade.

S&P Global said several manufacturers noted that delivery delays had disrupted their production volumes in October. Vendor delivery times deteriorated the most since August 2022, and companies in the survey noted tariffs and global conflicts had underpinned product shortages and supply-chain disruption, forcing manufacturers to use existing inventory wherever possible, S&P Global said.

Input cost inflation was the most aggressive since June 2022, with companies again pointing to tariffs as driving up prices. The survey showed that manufacturers responded by increasing their own charges to a greater degree, with inflation accelerating for a second month in a row to the fastest pace in more than four years.

Confidence in the outlook among manufacturer remained historically subdued, and while some companies are hopeful that production and new work will pick up they remained concerned over the impact on market demand of tariffs and broader geopolitical headwinds, S&P Global said.

The Trump administration in August imposed new 50% tariffs on the equivalent of about 5% of Canadian exported goods, and then in September the president signed orders to ban the importation of many dairy products, alcoholic beverages and motorcycles from Canada in response to retaliatory Canadian tariffs on about $20 billion worth of U.S. goods.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

November 02, 2026 10:12 ET (15:12 GMT)