Canada Manufacturing PMI Falls to 47.7 in September 2025

Canada’s manufacturing sector contracted for the eighth consecutive month in September 2025, with the S&P Global Canada Manufacturing PMI declining to 47.7 as ongoing trade challenges and economic uncertainty continued to suppress demand. This reading represents a faster deterioration from August’s 48.3 figure and remains firmly below the 50.0 threshold that distinguishes expansion from contraction, indicating persistent difficulties for the country’s industrial foundation.

Steepest Output and Order Declines Since Early 2025

Manufacturing production and new orders both contracted at accelerated rates during September, extending what has now become an eight-month downturn. The report showed particularly sharp declines in export orders, with companies consistently identifying tariffs and economic uncertainty as primary contributing factors. This marks the longest continuous contraction period since the 2020 pandemic disruptions, though the current decline remains less severe than that crisis period.

Paul Smith, Economics Director at S&P Global Market Intelligence, observed that “output, new orders and exports all continued to fall, with the uncertain trading environment also leading firms to make cuts to purchasing, inventories and employment.” The manufacturing sector’s performance has now underperformed for most of 2025, raising concerns about broader economic consequences. According to Statistics Canada data, manufacturing represents approximately 10% of Canada’s GDP and employs over 1.7 million workers, making the extended downturn significant for the national economy.

Tariffs and US Trade Relations Remain Primary Concerns

Canadian manufacturers reported that tariffs continued to severely impact export performance, with sales to the United States showing particular weakness. The Canada-United States-Mexico Agreement framework, while maintaining trade flows, has not prevented additional tariff measures from affecting specific sectors. Survey participants consistently identified trade relations with the United States as their dominant concern, noting detrimental impacts on both export volumes and business confidence.

“Once again tariffs and Canada’s trading relationship with the United States remained a dominant theme amongst survey participants,” Smith emphasized in the press statement. The PMI report indicated that firms are adopting a “wait-and-see attitude rather than plan for and commit to new projects” due to the uncertain trade environment. This cautious approach has led to reduced capital investment and hiring freezes across multiple manufacturing subsectors, from automotive parts to industrial machinery.

Employment and Inventory Strategies Reflect Extended Uncertainty

Manufacturing employment declined for the eighth straight month in September, though the rate of job losses moderated to the softest pace since February. Companies primarily achieved workforce reductions through natural attrition rather than widespread layoffs, choosing not to replace departing employees while implementing selective workforce adjustments where necessary. Industry analysis suggests this pattern reflects expectations of a prolonged adjustment period rather than a sudden collapse.

Inventory strategies also shifted significantly, with manufacturers cutting both pre-production and finished goods stocks in response to weakening demand conditions. This inventory reduction strategy indicates businesses are preparing for continued challenges in the coming months. As originally reported in manufacturing industry analysis, the combination of employment caution and inventory drawdowns suggests manufacturers anticipate the current downturn will persist through the remainder of 2025.

The persistent manufacturing contraction raises important questions about Canada’s economic resilience and the effectiveness of current trade policies. With the sector facing its longest downturn since the pandemic, industry observers will be watching closely for any signs of improvement in the coming months.

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