Canada’s manufacturing sector expanded for a second consecutive month in February, supported by stronger domestic demand even as export sales remained weak and inflation pressures intensified.
According to data released on Monday, the S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) rose to 51.0 in February from 50.4 in January. This marks the highest reading since January 2025. A PMI figure above 50 signals expansion in the manufacturing sector.
New orders return to growth
February data pointed to renewed momentum in Canadian manufacturing. New orders increased despite softer export demand and continued challenges linked to U.S. tariffs.
The new orders index climbed to 50.6 from 49.3 in January, recording its first expansion since January last year. However, new export orders remained in contraction territory at 46.6, although that was an improvement from 44.6 in the previous month.
Canadian exporters continue to face pressure from U.S. tariffs on key industries, including autos, steel and aluminum. These trade measures have weighed on cross-border shipments and limited external demand.
Employment and business optimism improve
Stronger workloads and signs of a recovery in domestic demand supported hiring activity. The employment index increased to 51.0 from 50.6 in January, marking the fastest pace of job growth in 13 months. Companies cited healthier order books and longer-term expansion plans as reasons for boosting staff levels.
Business confidence also improved, with the measure of firms’ optimism rising to its highest level since December 2024.
Inflation pressures build
At the same time, inflationary pressures remained elevated. The input price index edged up to 59.1 in February from 59.0 in January, reaching its highest level since August. Manufacturers reported higher metal prices and increased costs for imported raw materials.
Factory gate prices also rose, hitting their strongest level since March 2025. The increase suggests that some companies are passing higher input costs on to customers.
Overall, the latest PMI data shows that Canada’s manufacturing sector continues to expand, driven mainly by domestic demand, while export weakness and rising input costs remain key challenges.
