Insights 
VT 
Canada’s manufacturing sales dropped by 2.8% in April, more than the anticipated 2.0%, marking the largest monthly decrease since October 2023 and the lowest level since January 2022. In March, sales had already fallen by 1.4%.
The decline was largely driven by petroleum and coal products, which saw a 10.9% decrease. Motor vehicles and primary metals also contributed, dropping by 8.3% and 4.4%, respectively. Even without petroleum and coal, sales were still down by 1.8%.
Year Over Year Decrease
Year-over-year, manufacturing sales fell by 2.7% in April, with a 1.8% decrease when adjusted for constant dollars. The Industrial Product Price Index decreased by 0.8% during the same month.
Manufacturers noted that recent U.S. tariffs have affected Canada’s manufacturing sector. Approximately half of those surveyed reported tariff-related impacts. A third mentioned price increases, a quarter faced higher costs for raw materials, shipping, or labour, and a fifth observed changes in product demand. The most affected subsectors included transportation equipment, primary metal, and fabricated metal, with Ontario seeing the most substantial tariff-related sales decline.
The initial data points to a clear weakening in Canadian manufacturing, with April’s 2.8% drop surpassing the forecast and following on from an already poor March. Taken together, the back-to-back monthly declines and the year-on-year losses highlight a loss of momentum not contained to one area. Particularly, the performance across multiple industries — from fuel refining to car production and heavy metals — draws attention to broad drag, not just niche sector disruptions.
Layered on top is the compound issue of U.S. tariffs, and it’s no minor irritant. About half of those in the business are already seeing tangible knock-on effects. Higher input costs, shifting demand, tighter margins — all of this is likely feeding into the broader pullback. Ontario, housing many of the plants affected, seems to be bearing the brunt.
Current Macroeconomic Pressures
Now, when viewed through a pricing lens, even the Industrial Product Price Index dipped 0.8%, reinforcing an environment where input and output values are falling in parallel. After adjusting these output figures to remove inflation, the drop holds — purchasers weren’t just paying less per unit, there were fewer units moving altogether.
It’s clear that macro pressures — U.S. policy being only one — are working their way into Canada’s core goods-producing sectors. Production seems to be slowing while impacted subsectors, especially within transportation and metal fabrication, are unlikely to rebound quickly unless conditions shift. Raw material inflation, in combination with reshaped demand, adds layers of difficulty.
For us, this softening manufacturing data — alongside rates of decline not seen since late 2023 — changes how risk should be viewed in the short term. Volatility is ticking up in sectors that, until recently, were more stable. With reduced output pushing the figures down and fewer goods entering supply chains, the environment is susceptible to exaggerated price movements on any data surprise or policy shift.
We’re keeping an eye particularly on data releases related to trade and domestic output. These may show early signs of whether producers are adjusting inventories or scaling back further to match softer demand. Tariff-related effects, while not new, seem far from priced in. More friction could disproportionally affect firms with slimmer margins or those tied closely to the U.S. market.
Put simply: we should expect follow-through from this softness in the weeks ahead. Gaps between expectations and actuals have been widening, so reactions are unlikely to remain muted. The spread between stronger and weaker subsectors could become more pronounced. Swings around industrial sentiment figures might now carry greater weight.
Timing matters. Market participants often over- or underreact to production trends, especially when headline drops are unexpected and exceed consensus. In this kind of setting, reaction time and properly placed exposure will matter more than usual. Industrials and energy-related names would not be left untouched, even if their weight in broader indices is modest.
Reading between the lines, producers are adjusting to cost changes — either by shrinking orders, cutting throughput, or delaying shipments. From a positioning point of view, we’re watching for any push toward lighter inventory levels and forward guidance that reflects these adjustments.
The backdrop remains one of weakening demand, price softness, and growing sensitivity to border policies. With no clear catalyst for reversal yet visible, pricing pressures and production volumes should be monitored with precision.
