Canadian factory PMI rises to 22-month high in December

TORONTO (Reuters): Canadian manufacturing activity increased at the fastest pace in nearly two years in December as inventory accumulation by U.S. clients in anticipation of trade tariffs provided a measure of support for export sales.

The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) rose to 52.2 in December from 52.0 in November, its highest level since February 2023 and the fourth straight month above the 50.0 no-change mark.

The average for the PMI in data going back to 2010 is 52.4. A reading above 50 indicates expansion in the sector.

U.S. President-elect Donald Trump is due to take office on Jan. 20 and is promising to impose a 25% tariff on all imports from Canada.

“Panellists are forecasting a near-term boost to sales ahead of these possible tariff changes, which helped bolster production expectations,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

“However, the shape and extent of these tariffs remains unknown and led to considerable uncertainty amongst firms when assessing the outlook.”

The future output index rose to 62.9 from 59.5 in November and the new export orders index was at its highest level since August 2023, improving to just short of the 50 threshold.

Some firms noted help from a weak Canadian dollar, which fell in December to the lowest level in nearly five years against its U.S. counterpart. A weaker currency could increase the competitiveness of Canada’s exports.

Not all was positive for the sector. Average lead times for the delivery of inputs lengthened for a sixth month running, with the deterioration in vendor performance at its steepest since August.

“Bottlenecks in domestic supply chains remained prevalent in December, with various port and postal strikes leading to considerable challenges for inbound production inputs and outbound shipping from manufacturers’ warehouses,” Smith said.

A month-long strike by Canadian postal workers ended in mid-December after the country’s labor relations board ordered an end to the work stoppage.

The measure of input costs rose to 57.5, its highest level since April 2023, as a stronger U.S. dollar raised the price of many imported goods.