Canada’s manufacturing pulse cooled in August while U.S. factories eked out modest gains, a split picture that underscores how the North American industrial cycle is still searching for firm footing.
Total manufacturing sales likely fell 1.5% in August, with the biggest pullbacks in transportation equipment and food.
The agency noted the estimate is based on a 68.2% weighted response rate and is subject to revision when the official report arrives on Oct. 15.
Transportation equipment is a heavy hitter for Canadian industry, and a simultaneous dip in food suggests both capital-goods and essentials producers faced softer demand or temporary disruptions.
U.S. output edges higher
South of the border, the Federal Reserve’s G.17 release showed industrial production rose 0.1% in August after a 0.4% decline in July.
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Manufacturing output, the piece most relevant to factory floors, increased 0.2% as motor vehicles and parts climbed 2.6%.
Capacity utilization held at 77.4% for total industry, with manufacturing at 76.8%, both below long-run norms and consistent with an economy that is expanding but not straining supply.
Mix typically supports margins in sectors with pricing power while curbing overheating risks that would push borrowing costs higher.
Survey signals remain cautious
Survey evidence continues to warn that the U.S. factory expansion remains fragile. The Institute for Supply Management reported its Manufacturing PMI at 48.7 in August, still below the 50 line that separates contraction from expansion.
New orders improved to 51.4, but production slipped and the employment index remained weak at 43.8.
The prices index stayed elevated at 63.7, signaling ongoing input cost pressure.
The ISM profile points to a sector that is working through uneven order books and cost pass-through while avoiding a deeper downturn.
Markets often look past one month’s PMI wobble when output and auto assemblies are firm, but a sustained sub-50 run tends to cap multiple expansion in more cyclical names.
Producer prices diverge
The Industrial Product Price Index rose 0.5% in August and 4.0% year over year, while raw material prices dipped 0.6% on the month and climbed 3.2% from a year earlier.
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Combination hints at some producer-level pricing power even as input costs eased at the margin, a setup that can stabilize margins if volumes hold.
For the Bank of Canada, firmer producer prices alongside softer factory sales argues for patience. It may favor quality balance sheets in industrials and staples over highly levered cyclicals that need robust top-line growth to outrun fixed costs.
The U.S. is the Commerce Department’s August durable goods report, due Thursday, which will clarify the trajectory for core capital goods orders and shipments.
July’s drop in headline durable orders, driven by transportation, set a low bar. If core nondefense capital goods rebound, it would reinforce the Fed’s output data and help validate the modest improvement in new orders captured by ISM. A miss would keep the burden on consumption and services to carry growth into the fourth quarter.
In the U.S., a slight lift in factory output and solid auto assembly support suppliers tied to vehicles and select machinery, but sub-trend utilization and soft hiring argue against broad-based risk-on across industrials.
In Canada, a transportation and food downdraft, even if partly noise, tilts attention to producers with export exposure to U.S. end markets that are still expanding. Producer price firmness rewards firms with demonstrable pricing power and diversified inputs.
