S&P Global reported that Canada’s manufacturing sector expanded for a fifth straight month in August, albeit at a slightly slower pace than in July. Canada’s manufacturing sector has improved in 2026 compared to 2025, suggesting manufacturers and businesses have adapted to trade disruptions with the US. However, the outlook is now clouded after fresh Canada-US trade tensions reemerged in late August.

• The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) declined to 53.0 in August from 53.5 in the previous month. The expansion was driven by a rise in output and new orders.
• Hiring and confidence both improved. The employment index climbed to 52.0, its highest reading since October 2024. Manufacturers grew notably more upbeat about the future, too, with the future output index rising to 58.7, its best level since December 2024.
• New export orders inched up to 48.2 from 48.0 but stayed below the 50.0 mark for a third straight month, as US tariffs and elevated fuel and metals prices continued to weigh on demand. Input cost inflation eased to a four-month low, though it remains historically elevated.
• South of the border, the S&P Global US Manufacturing PMI was unchanged at 53.9 in August, still pointing to solid expansion, though output growth slowed to its weakest pace since February as tariff-related costs and material shortages weighed on producers.

Canada’s factories held onto their growth streak in August, but the timing is worth noting as most of the survey was conducted before trade talks with the US collapsed and new 50% tariffs took effect on August 22. New export orders are already stuck below 50 heading into a period of even greater trade uncertainty, which could weigh on the sector. Markets will be closely monitoring how the tariff escalation feeds through to Canadian factories in the months ahead.

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