The Canada S&P Global Manufacturing PMI for February 2025 recorded a decline to 47.8, down from 51.6 in the previous month. Input cost inflation hit its peak since April 2023, influencing both consumer spending and corporate investment.
Tariff uncertainties on goods crossing the Canada-United States border have negatively affected the manufacturing sector. The survey indicated a notable decrease in output, driven by falling new orders both domestically and internationally.
Decline In Manufacturer Confidence
Manufacturers are now exhibiting lower confidence levels, the weakest since April 2020. This downturn has led to reductions in purchasing and employment since January, compounded by rising input prices attributed to a stronger US dollar.
A reading below 50.0 indicates contraction, meaning factory activity in Canada has weakened in February. This drop below neutral follows a brief expansion in January, highlighting a sharp turn in sentiment. With firms scaling back purchases and cutting jobs, concerns over future demand have risen sharply. The pressure from higher costs has led to tighter spending within businesses, limiting new investment and hiring.
Price increases, mainly influenced by currency fluctuations, have compounded these challenges. A stronger US dollar has raised the cost of imported materials, narrowing profit margins. Firms have struggled to pass these costs onto clients, leading to squeezed earnings. At the same time, uncertainty over trade barriers has discouraged long-term planning, affecting both production schedules and inventory decisions.
Economic Risks And Business Strategy Shifts
For those tracking these developments, the combination of weaker demand and rising costs presents a complex set of risks. The decline in factory orders, particularly from buyers abroad, reflects a broader pullback in global trade. The effects of this stretch beyond just output figures; they shape market expectations around economic momentum in Canada.
Survey respondents reported hesitancy in committing to capital spending, mirroring patterns last seen in early pandemic months. This reluctance suggests concerns about the broader economic environment, making near-term forecasts sensitive to any further disruptions. If cost pressures remain unchecked while orders continue to decline, businesses may shift strategies further, adopting more defensive positions in spending and hiring.
