Business activity, as measured by manufacturing and services sector activity, slowed in April, according to a flash estimate from S&P Global. The slowdown came amid heightened uncertainty about the health of the global economy in response to trade tensions. While the US paused higher reciprocal tariffs, some key trade partners still face other tariffs, and several countries retaliated with tariffs of their own against the US. Trade tensions have heightened investor uncertainty, leaving financial markets prone to relatively wide swings.

• According to a flash estimate, the S&P Global US Composite Purchasing Managers Index fell to 51.2 in April from 53.5 in March. (A reading above 50 denotes expansion.) This marked the slowest pace of growth in business activity since December 2023. Economic uncertainty and falling consumer and business confidence weighed on business activity during April.
• Services sector activity slowed over the month. New orders were dragged down amid expectations of slower economic growth in response to tariffs. This also resulted in a slowdown in employment growth.
• Activity in the US manufacturing sector picked up in April, albeit at a relatively tepid pace. Concerns about the supply chain and moderating trade activity hindered the sector. Domestic orders increased in April, but this was partially offset by a drop in export orders.
• Yesterday, markets received some good news that the simmering trade battle between the US and China could be resolved. US President Donald Trump said he would be willing to be “very nice” in trade talks with China and cut tariffs if a trade deal is reached.

Trade tensions have dragged down consumer and business confidence, as demonstrated by recent spending activity. In response, US business activity is moderating. The US hopes tariffs will help bring manufacturing businesses back to the country. Softer economic activity in the US, combined with slower trade activity, could weigh on Canada’s economic growth.

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