After two months of recovery, an early estimate indicates a pullback in August, suggesting that factory activity in Canada has stalled. According to preliminary data released Wednesday by Statistics Canada, manufacturing sales fell an estimated 1.5% from July. Food and transportation equipment saw the biggest drops amongst other dips as well. The setback occurs even though there have been recent indications that things are stabilizing for manufacturers, who have been continuously hampered by changes in U.S. trade policy and shifting import duties. While this dip certainly isn’t beneficial for the Canadian economy, it is unsure what the future will look like.
Canada factory sales drop 1.5% in August
Factory sales posted their largest monthly increase since August 2023 in July, jumping 2.5% to a seasonally adjusted 70.32 billion Canadian dollars (about $50.82 billion). This came after a five-month run of declines ended with a 0.3% increase in June. S&P Global’s manufacturing purchasing managers’ index, meanwhile, indicated that the industry is still facing challenges. For the seventh consecutive month in negative territory, the headline reading increased marginally to 48.3 in August, but it is still below the 50 threshold that distinguishes expansion from contraction.
Although many Canadian exports are still exempt under the North American trade pact, trade-exposed industries, such as manufacturing, are still struggling with low demand and uncertainty related to U.S. tariffs.
The economy as a whole has also stalled. In contrast to the first quarter’s downwardly revised growth of 2%, Canada’s GDP shrank at an annualized pace of 1.6% in the second quarter. Although Statistics Canada’s preliminary estimate indicated a modest 0.1% growth in July, industry-level output decreased 0.1% month over month during the April–June period.
A 68% response rate to Statistics Canada’s monthly survey served as the basis for the August manufacturing sales forecast. The deadline for final results, which include more comprehensive data, is October 15.
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