Canada's Factories Hit Four-Year High Amid Tariffs and Inflation Fears

Canada's manufacturing sector has reached its fastest growth in over four years, according to S&P Global. The firm's Canada Manufacturing Purchasing Managers' Index (PMI) rose to 53.5 in July from 53.0 in June. Any PMI above 50 signals expansion, and the data suggests this growth was largely driven by domestic demand.

The details of the report show that output and new orders improved, while firms added staff to meet workloads. However, there is a caveat: softer international demand and an uncertain trade backdrop due to US tariffs on nearly $20 billion of Canadian goods.

Costs also jumped, with the input prices index climbing to 68.3, its highest since July 2022. This increase in costs could have lasting implications for businesses and consumers alike. The Bank of Canada may find it harder to cut rates quickly if those costs continue to rise.