Canada’s manufacturing sector accelerated in April, posting its most vigorous expansion since June 2022 as businesses increased purchasing and output amid heightened inflationary pressures, according to data released Friday.
The S&P Global Canada Manufacturing Purchasing Managers' Index rose to 53.3 last month from 50.0 in March. By convention, readings above 50 signal growth in the sector and this latest figure marks the highest PMI reading since June 2022.
Inventory and demand readings
Firms appear to have rebuilt stocks in April. The stocks of purchases index climbed to 50.7, up from 49.7 in March, reaching its highest reading since August 2024. That increase in purchasing inventories coincided with a pickup in activity measures across the survey.
The output index rose to 53.4 from 49.6 in March. New orders also strengthened, jumping to 55.0 from 48.7, a gain that reflects broader improvements in order books during the month.
Drivers and caution
Paul Smith, economics director at S&P Global Market Intelligence, urged caution in interpreting the April improvement. "Growth appears to be driven by worry rather than any meaningful or permanent uplift in demand," Smith said. "That’s squarely due to the war in the Middle East and the associated energy price and supply shock, the effects of which are now cascading across global markets and leading to a scramble to secure stock and lock in prices with suppliers."
The data note that two months into the U.S.-Israeli war with Iran, the Strait of Hormuz remains closed, removing around 20% of the world’s oil and gas supplies and contributing to a surge in global energy prices. That disruption is cited in the survey as a key factor behind higher procurement and inventory activity.
Trade and tariff context
The report also highlights that new orders, particularly export orders, had been constrained by U.S. tariffs affecting sectors including autos, steel and aluminum. Despite those headwinds, the headline PMI and its subcomponents moved decisively into expansionary territory in April.
While the numbers show a clear uptick in short-term activity, the commentary from S&P Global suggests the improvement may be temporary, reflecting precautionary measures by manufacturers rather than a sustained rise in demand.
Key points
- S&P Global Canada Manufacturing PMI rose to 53.3 in April from 50.0 in March, the strongest reading since June 2022.
- Stocks of purchases reached 50.7, the highest since August 2024, while output rose to 53.4 and new orders climbed to 55.0.
- Energy market disruptions tied to the Middle East and existing U.S. tariffs on autos, steel and aluminum are influencing procurement and export dynamics.
Risks and uncertainties
- The improvement may be driven by precautionary stock-building rather than a sustained rise in underlying demand, limiting the durability of the expansion - this affects manufacturing and supply-chain dependent sectors.
- Continued closure of the Strait of Hormuz and related global energy price volatility could sustain inflationary pressures, impacting costs across industries.
- U.S. tariffs on sectors including autos, steel and aluminum remain a constraint on export orders and could dampen external demand for Canadian manufacturers.