Canadian Factory PMI Edges Higher Despite War-Linked Supply Disruptions

• Canada's manufacturing sector expanded further in June as production and employment increased, but not all was positive for the sector as intensifying supply shortages helped lift cost inflation to a near four-year high.
• The S&P Global Canada Manufacturing Purchasing Managers' Index (PMI) edged up to 53.0 in June from 52.9 in May, marking the sixth consecutive month that the index remained at or above the 50-point threshold, signalling continued expansion in manufacturing activity.
• According to S&P Global Market Intelligence, Canada's manufacturing economy on the surface enjoyed a positive June with solid gains in output and new business supporting a third consecutive month of employment growth. However, manufacturers also reported a decline in export sales as global demand remained uneven.
• Growth continued to be supported by stockpiling activity, as firms and their customers sought to build inventories amid substantial supply-side disruption. Suppliers' delivery times lengthened to the greatest extent since September 2022, reflecting shipping delays linked to the Middle East conflict.
• High oil prices, rising transportation costs and U.S. tariffs continued to push up costs. The input price index rose to 67.2 from 66.5 in May, its highest reading since July 2022, while manufacturers also increased selling prices to help offset higher operating costs.
• Despite stronger production and hiring, business confidence slipped to a three-month low, as firms remained concerned that elevated input costs, supply shortages and trade-related uncertainty would continue to weigh on growth over the coming months.

(Source: Reuters)