S&P Global released its monthly report on Canadian manufacturing activity during October. The report showed that manufacturing activity shrank again. Canadian manufacturing has been significantly impacted by trade tensions with the US, particularly in industries such as steel, aluminum and automotive. Weak manufacturing activity has been one of the primary drags on Canadian economic growth over the second and third quarters.

• The S&P Global Canada Manufacturing Purchasing Managers Index edged higher to 49.6 in October from 47.7 in September. Despite the slight improvement, the index remains below 50, indicating contractionary conditions.
• Manufacturing activity has shrunken for nine straight months, albeit October was at the slowest pace. US tariffs have weighed heavily on the sector, resulting in a decline in US orders for Canadian-manufactured goods.
• New orders and output both contracted in October, but at a slower pace than in September. Employment also declined. The sector has seen extensive job losses primarily in response to lower activity.
• South of the border, the US manufacturing sector picked up in October, expanding for a third straight month.
• Elsewhere, European manufacturing activity returned to growth in October, while manufacturing in China pulled back but still expanded. Trade tensions have hindered China’s critical manufacturing sector. However, the tariff truce may give a boost to China’s manufacturing in the months to come.

Last Friday, Statistics Canada reported that Canada’s gross domestic product declined in August, mainly due to a pullback in goods-producing industries. Canada’s economy is under pressure, but further support may be forthcoming. The Canadian federal government announces its budget today, which is expected to focus on transitioning and growing Canada’s economy. Furthermore, while trade talks with the US have been halted, Canadian government officials are prepared to get back to the negotiating table once talks resume.

If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.