TORONTO — Canada's manufacturing sector contracted in October for the first time this year, as tariffs and geopolitical uncertainty weighed on activity and inflation pressures intensified, S&P Global data showed on Monday.

Source: Reuters

The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) fell to 49.6 last month from 51.5 in September, marking the first move below the 50 threshold since December. A reading below 50 indicates contraction in the sector.

49.6Canada manufacturing PMI in October, down from 51.5 in September
46.5New orders index — the lowest reading since September 2025
71.7Input costs index — the highest in more than four years

"Having enjoyed an uninterrupted run of solid growth throughout 2026 so far, Canada's manufacturing sector ran out of steam in October," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement. "Against a backdrop of tariffs and ongoing supply-side disruption, firms reported concurrent drops in both output and new orders over the month."

The output index fell to 48.4 from 50.8 in September — the first decline in production since March — while export orders fell for a fifth straight month, with the sharpest drop since January. Average lead times for the delivery of inputs lengthened to the greatest degree since August 2022, as tariffs and global conflicts contributed to product shortages and supply-chain disruption.

The squeeze is landing on both sides of the factory gate at once. Measures of input costs and output prices rose to the highest levels in more than four years, at 71.7 and 62.3 respectively, and employment recorded its first net decline since March — even as activity slowed.

A trade rift between the United States and Canada widened in August, when the US imposed 50% tariffs on a wide range of imports from Canada and Canada responded with retaliatory tariffs. Last Wednesday, the Bank of Canada raised its benchmark interest rate by 25 basis points to 2.50% and said further increases might be needed to prevent soaring energy costs from fuelling broader inflation.

For Punjabi and other South Asian workers and business owners concentrated in Ontario's manufacturing, trucking and warehousing belts, the combination matters twice over: fewer orders mean thinner shifts and loads, while four-year-high factory-gate prices feed the inflation the central bank is now hiking rates to fight.