Report: Canada sees continued drop in manufacturing production in June

July 8, 2019 – Canada has seen a sharp decline in production volumes over the past three months, according to IHS Markit’s latest Manufacturing Purchasing Managers Index (PMI) report.

Records from June show that fewer work orders contributed what has been the steepest drop in production in the past 3.5 years. For the past three months, the index readings have been below 50 (which marks no change in work orders). This is the longest period of decline since 2015-16.

IHS Markit, a research and analytics company, sends a monthly survey to a panel of about 400 manufacturers in Canada. In the June report, manufacturers indicated that a lack of new work was available to replace completed orders at their plants, leading to the decrease in production. Some panellists speculated that less demand in the U.S. markets and global trade issues factored into fewer production orders from abroad.

Less demand for materials and lower steel prices in North America post-tariffs added to cost pressure, with input price inflation remaining close to the 52-month low reported in May.

Manufacturers who did experience a rise in input prices cited the pass-through of tariffs from the U.S. to China as one of the reasons.

“The latest survey results provide a clear sign that U.S.-China trade frictions are holding back the Canadian manufacturing sector,” says Tim Moore, economics associate director of IHS Markit, in the report. “New orders have now decreased for four months in a row, with survey respondents widely commenting on subdued export demand and weaker global trade volumes so far this year. Moreover, manufacturers indicated that their business optimism dropped sharply in June and was among the weakest seen since the start of 2016.”