Canada’s manufacturing sales fell by 2.8% in April, exceeding the expected 2.0% decline. This marks the largest monthly drop since October 2023 and the lowest level since January 2022. In March, sales had already decreased by 1.4%. The primary cause of this decline was a sharp 10.9% decrease in petroleum and coal products. Sales of motor vehicles and primary metals also dropped by 8.3% and 4.4%, respectively. Excluding petroleum and coal, sales were still down by 1.8%. Compared to April last year, manufacturing sales fell by 2.7%, showing a 1.8% decrease when adjusted for constant dollars. The Industrial Product Price Index also dropped by 0.8% during the same month. Manufacturers reported that recent U.S. tariffs have impacted Canada’s manufacturing sector. About half of those surveyed indicated they felt the effects of tariffs. A third reported price increases, a quarter faced higher costs for raw materials, shipping, or labor, and a fifth noticed changes in product demand. The most affected areas included transportation equipment, primary metals, and fabricated metals, with Ontario experiencing the greatest drop in sales due to tariffs. This data signals a notable downturn in Canadian manufacturing. The 2.8% decline in April exceeded expectations and followed an already poor showing in March. The consecutive monthly decreases and year-on-year losses indicate a widespread slowdown across various industries — from fuel refining to car production and heavy metals — rather than just isolated disruptions. The challenges are compounded by U.S. tariffs, which are significantly affecting the industry. Many businesses report experiencing higher input costs, changing demand, and tighter profit margins, especially in Ontario, where many affected plants are located. In terms of pricing, even the Industrial Product Price Index showed a 0.8% decline, highlighting a scenario where both input costs and output prices are decreasing. After adjusting for inflation, it becomes clear that fewer units were sold at lower prices. It’s evident that broader economic pressures, including U.S. policies, are influencing Canada’s manufacturing sectors. Production is slowing down, and the areas most affected, particularly transportation and metal fabrication, may not recover quickly without changes in conditions. The rise in raw material costs and evolving demand patterns adds further complexity. This decline in manufacturing data, along with rates not seen since late 2023, affects our outlook on short-term risks. Volatility is increasing in sectors that were previously stable. With less output, the situation is prone to sharp price swings in response to any surprise data or policy changes. We are closely monitoring trade and domestic output data, as these may provide early signs of whether producers are adjusting their inventories or cutting back further due to lower demand. The effects of tariffs are still not fully factored in, and additional challenges could disproportionately affect firms with thin margins or those closely linked to the U.S. market. In summary: we should anticipate ongoing softness in the coming weeks. The gap between expectations and actual results is widening, making it unlikely that market reactions will remain subdued. Differences between stronger and weaker sectors may become more evident, and fluctuations in industrial sentiment figures may carry greater significance. Timing is crucial. Market participants often react strongly to unexpected production trends, especially when drops exceed expectations. In this environment, quick decision-making and strategic positioning are more important than ever. Industrial and energy-related companies will likely feel the impact, even with their smaller weight in broader indices. Producers are adapting to cost changes by reducing orders, cutting production, or delaying shipments. We are watching for any shifts toward lower inventory levels and forward guidance that reflect these changes. The overall climate is one of declining demand, softer prices, and increasing sensitivity to policy changes. Without a clear catalyst for recovery, we must carefully monitor pricing pressures and production volumes.

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