By Fergal Smith
TORONTO (Reuters) -Canadian manufacturing activity contracted in April at the steepest rate since shortly after the start of the COVID-19 pandemic as the uncertain nature of U.S. trade policy weighed on production and new orders.
The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) fell to 45.3 last month from 46.3 in March, its lowest level since May 2020. A reading below 50 indicates contraction in the sector.
“The uncertainty regarding the future direction and implementation of tariffs was again especially damaging, with markets characterised by hesitancy and delayed decision making,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“Reflective of the unpredictable environment firms are operating in, capital goods producers again reported especially steep falls in output and new work.”
The output component fell to 42.7 from 45.7 in March and the new orders measure was at 41.2, down from 42.3.
Canada sends about 75% of its exports to the United States, including steel, aluminum and autos which have been hit with hefty U.S. duties. Retaliatory tariffs have been imposed on some U.S. goods.
The Bank of Canada says that a long-lasting global trade war could trigger a significant recession in Canada and lead to inflation temporarily rising above 3%.
The measure of input prices remained at an historically elevated level and average lead times for the delivery of inputs worsened for a 10th straight month.
“Firms reported delays at ports and at customs points, which led to a further lengthening of supplier delivery times despite a noticeable reduction in demand for manufacturing inputs,” Smith said. “Prices also rose steeply, especially for metals products.”
The Future Output Index rose to 50.4 from 45.1 in March as some firms pinned hopes on a more stable market environment in a year’s time, but the measure still reflected a subdued level of confidence, S&P Global said.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama)
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