Canadian Manufacturing Contracts to 49.6 in October as German Sector Expands to 54.2
Key Facts
Canadian manufacturing activity contracted in October for the first time since December, as the S&P Global purchasing managers’ index fell to 49.6 from 51.5 in September, according to a Reuters report published by WSAU. A reading below 50 signals contraction in the sector, after the index had exceeded that threshold in the previous month. By contrast, Germany’s manufacturing purchasing managers’ index rose to 54.2 in October from 53.9 in September, according to Investing.com data, keeping it in expansion territory. The readings point to divergent paths for two manufacturing sectors affected by external demand and production costs. In Germany, S&P Global Market Intelligence’s Phil Smith said the recovery remained on track despite the return of cost pressures.
The decline in Canada’s index came alongside falls in the output and new orders indexes. The output index fell to 48.4 in October from 50.8 in September, while the new orders index declined to 46.5 from 49.3. The new orders reading was its lowest since September 2025, pointing to a broadening weakness in demand across factories. The Reuters report attributed pressure on activity to tariffs and geopolitical uncertainty, while inflationary pressures intensified. Output and orders therefore contracted at the same time as input costs and product prices rose, signals specific to manufacturing that do not amount to a diagnosis of the entire Canadian economy.
Canada’s input costs and output prices indexes rose to their highest levels in more than four years, reaching 71.7 and 62.3, respectively, according to Reuters. The increase adds to pressure on factories as new orders decline. Input delivery times also lengthened by the most since August 2022, amid product shortages and supply chain disruption linked to tariffs and global conflicts. Together, slower activity, rising costs and disrupted supplies are putting pressure on manufacturers on both the production and supply sides. According to the published indexes, Canada’s decline was not limited to a single component of manufacturing activity.
In Germany, output continued to rise for a tenth consecutive month, but the pace of growth was the weakest since July, according to Reuters via Euronext. Growth in new orders slowed to a three-month low, while export sales increased at a strong pace, slightly faster than in the previous month. External demand was at its second-strongest level in more than four and a half years, after an August peak, and companies reported higher sales in Asia, North America and parts of Europe. Exports and demand linked to government spending also supported output and orders in October. These details show that external demand and domestic demand linked to government spending continued to support activity, while momentum in output and new orders eased.
Outstanding work in Germany rose for a third consecutive month, with the pace of increase remaining at its joint-highest level since April 2022, according to Reuters. The continued accumulation of work indicates that orders remain in progress even as growth in new orders slows. At the same time, input price inflation reached a five-month high, while business confidence fell to its lowest level since July as rising costs weighed on sentiment. Companies nevertheless remained optimistic about output over the coming year, according to a Reuters report via MarketScreener. Smith said, "The German manufacturing sector's recovery remained on track in October despite the return of cost pressures," describing a recovery that continues alongside renewed pressure on companies.
Attention in Germany is turning to September industrial production data, scheduled for release on 6 November 2026, according to the release calendar attributed to Germany’s Federal Statistical Office. The data will provide a later reading for the period preceding October’s indicators, which showed continued growth in industrial output according to the purchasing managers’ survey. In Canada, international merchandise trade data covering September 2026 are scheduled for release on 4 November, according to Statistics Canada’s calendar. These releases come in a week of monitoring activity and trade indicators in both countries, following declines in Canadian output and orders indexes and slower growth in German orders. The divergence between the countries’ October readings remains a focus for tracking the path of industrial activity and price pressures.