Author: Consultant

Canada’s manufacturing sector expanded at the slowest pace in six months in September as trade frictions and elevated energy prices weighed on activity, while confidence in the outlook dropped to the lowest level in nine months.

The S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) fell to 51.5 last month from 53.0 in August, marking the lowest level since March. A reading above 50 indicates expansion in the sector.

“Canada’s manufacturing economy showed a degree of resilience in the face of several headwinds during September,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement. “However, tariffs and elevated global energy prices due to the war in Iran continued to have a damaging impact on the sector.”

A U.S. import ban on many Canadian alcoholic beverages, motorcycles and dairy products took effect on Tuesday after talks involving President Donald Trump and Prime Minister Mark Carney broke down in August.

The output index dipped to 50.8 from 52.8 in August, while the new orders measure slipped below the 50 threshold for the first time since March.

“These issues didn’t just cause present difficulties, such as around stock and production management, but also added to a pervading uncertainty amongst clients and manufacturers alike especially given the seemingly intractable nature of trade tensions with the US and the ongoing conflict in the Middle East,” Smith said.

The future output index fell to its lowest level since December 2025 at 54.6, down from 58.7 in August, while delivery delays grew the most widespread since August 2022 and inflation pressures intensified.

The measure of input costs rose to 71.1 from 66.4 in August, notching its highest level since July 2022.

A proposed pipeline from Alberta to the West Coast has been designated a project of national interest, Prime Minister Mark Carney said Thursday, citing the conduit’s economic benefits and how it can boost Canada’s share of global energy markets.

This is the first time that the government has made an official designation of a project of national interest under the Building Canada Act. The legislation is a marquee part of Mr. Carney’s economic agenda and while the government has begun the process of listing other projects in the national interest, none of the others have yet passed the final hurdle.

Mr. Carney made the announcement on a frosty morning in Fort McMurray in northern Alberta – the heart of the oil sands – alongside Premier Danielle Smith and Indigenous leaders from various communities in the region, including Treaty 8 Grand Chief Trevor Mercredi.

With global oil demand at around 100 million barrels a day and supply becoming more volatile in the face of conflicts in the Middle East and Ukraine, Mr. Carney said: “The question is, who will emerge as the world’s trusted suppliers? It should be us. It must be Canada.”

U.S. threatens France and Germany to release diesel stocks or face export ban, Reuters sources say

The next step for the pipeline – now called Pacific Link – is a federal review process, including consultations with stakeholders about the project’s ownership, as well as Indigenous rights and environmental protections.

Ottawa’s Major Projects Office will lead that process with support from the Canada Energy Regulator, federal officials said Thursday.The MPO aims to finalize conditions of the project by Sept. 1, 2027, so the pipeline can be under construction by 2032. Its expected price tag is between $35.2-billion and $43.7-billion.

As the arrangement stands, Canada and Alberta would share equal ownership of Pacific Link. Indigenous communities would be offered a minimum of 10-per-cent ownership interest through federal and provincial Indigenous loan-guarantee programs, officials said.

The pipeline is a key part of Mr. Carney’s suite of policy changes that aim to reset federal relations with Alberta and diversify Canadian exports away from the United States. It would carry one million barrels of oil a day to the coast, largely following the route of the Trans Mountain system, allowing Alberta oil to access more international markets and garner higher prices.

Economics of West Coast pipeline in focus ahead of Ottawa major project decision

Faster project approvals for major projects has been a major focus for the federal government under Mr. Carney. Last month, for example, it tabled Bill C-39, the Building Canada Strong Act. The legislation aims to introduce a system where major projects such as pipelines get just one review and receive a decision within one year.

Major infrastructure builds in Canada have been “weighed down by well-intentioned but arduous and often duplicative regulatory processes” in recent years, Mr. Carney said Thursday.

“Investors should know that when Canadians want something built, Canada will get it built. In a more volatile, dangerous and divided world, speed, certainty and predictability are competitive advantages,” he said.

“Canada will remain a country of high standards, but high standards do not require slow decisions.”

But the Coldwater Indian Band, in B.C, is opposing the speed at which Ottawa listed the new pipeline as a project of national interest.

The group says the federal government has yet to follow through on previous obligations to the community and did not allow for enough time during wildfire season to have meaningful consultations on the new pipeline.

“There is anger in our community today, as we hear that Canada has given the green light to a third Trans Mountain pipeline through the Coldwater Valley. The Crown’s duty to consult and accommodate Coldwater remains unfilled and Canada and Trans Mountain are not legally or respectfully operating in our reserve,” Vice-Chief Michael Smithers said in a press release.

Environmental groups also slammed the designation.

The world doesn’t want or need another pipeline, and Pacific Link will put billions of taxpayers dollars at risk, said Emilia Belliveau, the energy transition program manager at Environmental Defence.

“There is no excuse for this reckless project that will deepen the climate crisis, put endangered Southern Resident Orca Whales at risk of extinction, and benefit very rich oil companies at the expense of everyday Canadians,” Ms. Belliveau said in a statement.

Keith Stewart, a senior energy specialist at Greenpeace Canada said Ottawa should be focusing on renewable energy, not fossil fuels.

“The only thing moving faster than the Prime Minister’s bulldozing of environmental laws and Indigenous rights is the unprecedented speed with which our would-be future customers in Europe and Asia are building solar power and wind farms to protect themselves against increasingly unreliable and conflict-ridden oil and gas imports,” Mr. Stewart said in a statement.

The business community, however, largely viewed the designation as a positive move that would boost growth in Canada’s energy sector.

“This designation demonstrates that the federal government recognizes what this project will mean for Canada’s economic prosperity and sovereignty,” the Business Council of Alberta said in a statement.

Bryan Detchou, the senior director of natural resources, environment and sustainability for the Canadian Chamber of Commerce, said the Pacific Link is a “prime example” of a major project in the national interest.

“Getting our resources to Asia-Pacific markets is a path to more production, prosperity and a brighter future for workers, their families and communities,” he said in a statement.

“This path will strengthen Canada’s role on the world stage, connecting our resources with new customers while helping support the stability and resilience of global supply chains, and reinforcing our reputation as a trusted partner to our allies.”

Brent benchmark oil ⁠prices rose by US$3 ​on Thursday after China suspended oil products exports, potentially tightening fuel markets already coping with supply shortages globally, while investors continued to assess diplomatic efforts to end the US-Israeli war on Iran.

The new front-month December Brent crude futures contract traded at US$101.06 per barrel at 10:52 a.m. ET or 1452 GMT, up 3 per cent, or US$3.02, from Wednesday’s close. The November contract ​expired on Wednesday, settling at US$103.50 per barrel, marking a monthly gain of around ‌14 per cent in September for the front-month contract.

US West Texas Intermediate crude futures were up US$1.67, or 1.9 per cent, at US$92.09 a barrel, having traded close to US$93 earlier in the session.

Prices were volatile on Thursday, having slipped more than 1 per cent in early trading before rebounding.

Chinese refiners have suspended exports of oil products to regions beyond Hong Kong and Macau until further notice, four people briefed on the matter said on ‌Thursday, a move ​that will further crimp war-constrained fuel markets. ‌A global diesel shortage fueled by the wars in Iran and Ukraine is unlikely to ease before next year, according ​to storage market indicators and industry participants.

“The Chinese export ban suggests concerns ⁠about domestic product availability,” UBS analyst Giovanni Staunovo said, adding that it remains to be seen whether the ⁠measures will support higher crude imports after recent drawdowns in Chinese crude and fuel stocks.

Global diesel supplies have tightened as a result of falling refining ​capacity due to attacks linked to the Middle East and Ukraine wars, raising pressure on governments to intervene to shield consumers.

“China’s pause removes a source of flexible supply at a particularly difficult moment. Middle Eastern disruptions have already reduced the availability of refined products, so importers have fewer alternatives,” said Nitesh Shah, commodity strategist at WisdomTree.

The Trump administration has told Germany and France to draw down emergency diesel inventories to help ⁠ease global fuel prices or face a potential US diesel export ban, three people close to the discussions said.

European diesel refinery profit margins were trading at around US$78.22 per barrel at 1145 GMT, down about 6 per cent from the previous session. The margin hit an all-time high of US$95 per barrel on September 23.

Asia’s gasoline margin <GL92-SIN-CRK> rose to a record high of US$50.53 per barrel over Brent crude on Thursday after various outages at regional refineries and China’s fuel exports ban, traders said.

Investors continued ⁠to watch diplomacy efforts and oil exports in the Middle East.

Iran is preparing ​a broader and more forceful response if the US resumes large-scale military attacks, sources said, while continuing a diplomatic push that ⁠Iranian officials privately see as unlikely to succeed.

Offering some relief to markets was news that Saudi Arabia resumed oil tanker loadings from Yanbu, after earlier restarting operations on ‌its East-West Pipeline.

Meanwhile, Goldman Sachs estimated Gulf oil exports, including “dark exports” involving ships operating with their location transponders turned off, have recovered ​to 23.3 million barrels per day over the last week, in line with their 2025 average, as exports doubled in September, it said in a note on Tuesday.

And OPEC+ oil-producing countries are likely to keep their oil production targets steady for November when they meet on Sunday, two sources with knowledge of the matter told ​Reuters.

Down ~240 points (~0.7%) to ~34,996 at midday, extending a three-day slide. Yesterday it closed at 35,236, down 224 points (-0.63%), its third straight losing day and lowest close since late July.

Reasons:

• Global bond rout. The US 10-year is near 5.3% and the 30-year at ~5.64%, the highest since 2002; Canadian yields are near multi-year highs. Financials (the index’s biggest weight) fell 1.7% on credit-quality and loan-growth concerns.
• Oil-driven inflation fears. Oil rose 2%+ after China suspended refined-fuel exports; Brent sits near $103 with US-Iran tensions unresolved (Trump denied reports he’d ease sanctions). Higher oil = “rates higher for longer” worries.
• Weak domestic data. Canada’s September manufacturing PMI dropped to 51.5 from 53, a six-month low; recent GDP data was subdued.
• Trade war escalation. A new US ban on multiple Canadian imports took effect, following Canada’s retaliatory tariffs earlier in September; the loonie is around 70.2 US cents.

Partial offsets: energy +0.7% on higher crude, tech +2.9% (Micron’s blockbuster earnings lifted the group), and First Quantum +3.1% after Panama recommended talks to reopen the Cobre Panama mine. Softer-than-expected US PCE inflation (3.4% vs 3.7% expected) cooled bets on another Fed hike, which helped gold and miners early, though materials still faded 1.2% by midday.

Note: session is still open, so these are intraday figures, not the final close.

TC Energy TRP-T -0.18%decrease said on Tuesday its Coastal GasLink Phase 2 project will proceed after LNG Canada and its joint venture partners made a positive final investment decision on the LNG Canada expansion project.

The company said Coastal GasLink Phase 2 will nearly double the pipeline’s capacity through the addition of new compressor stations and upgrades along its existing 670-km route linking Dawson Creek and the LNG Canada export facility in Kitimat, British Columbia.

Tight global markets, outages among major producers and strong long-term demand growth from countries seeking to replace coal with cleaner-burning natural gas are driving interest in new LNG projects and more diversified sources of supply.

Earlier on Tuesday, LNG Canada partners led by Shell approved a multi-billion-dollar Phase 2 expansion of the Kitimat facility that will double its production capacity to 28 million metric tonnes a year from 14 million metric tonnes per annum (mtpa), strengthening Canada’s position in the global LNG export market.

LNG Canada, Canada’s first large-scale LNG export terminal, is a joint venture between Shell, Petronas, PetroChina, Mitsubishi Corp and Korea Gas Corp , and ranks among the country’s largest private-sector investments.

TC Energy operates a 58,100-mile network of pipelines, supplying more than 30 per cent of the clean-burning natural gas consumed daily across North America.

• Private sector companies added 90,000 jobs in September, up from 36,000 the prior month and better than the Wall Street consensus for 68,000, ADP reported Wednesday.
• Health care-related fields led job creation while financial activities and a few other sectors reported losses.
• The count comes ahead of Friday’s nonfarm payrolls report from the Bureau of Labor Statistics.

e job creation picked up in September after a brief slowdown, providing further indication that the U.S. labor market has stabilized, according to an ADP report Wednesday.

The payrolls processing firm said company employment rose by 90,000 for the month, higher than the downwardly revised 36,000 in August and better than the Dow Jones consensus estimate for 68,000.

There also was a fair amount of balance in the report, with service providers adding 59,000 positions while goods producers contributed 31,000.

Base pay rose 3.2% from a year ago, while gross pay accelerated by 4.7%.

“It’s a strong report,” said ADP’s chief economist, Nela Richardson. “After a three-month slowdown, job
creation rebounded and pay growth remained solid.”

Education and health services contributed the most, with 55,000 new hires. Other areas of growth included leisure and hospitality (22,000), manufacturing (17,000), and construction (15,000).

A handful of sectors saw job losses, including financial activities (-16,000), professional and business services (-11,000), and natural resources and mining (-1,000).

Much of the employment growth came from the Northeast, which added 56,000. By size, companies with between 50 and 499 workers saw a gain of 54,000.

Broadly, the report helped confirm sentiment expressed by multiple Federal Reserve officials that the labor market is mostly sound following a growth scare in 2025. Policymakers see the greater policy risk now as the persistent inflation that pushed central bankers to raise benchmark borrowing rates by a quarter percentage point earlier in September.

The ADP count serves as a precursor to the nonfarm payrolls report that the Bureau of Labor Statistics will release Friday. The Wall Street consensus is for a gain of 84,000 jobs, down from a 162,000 increase the prior month, and the unemployment rate to hold steady at 4.1%.

Economic growth cooled off ahead of the latest U.S. tariff volley this summer, Statistics Canada said Tuesday.

The agency said real gross domestic product was essentially unchanged in July. Strength in construction and utilities that month was offset by declines elsewhere in the economy.

TD Bank economist Marc Ercolao said stalled growth in July isn’t alarming. Some of the month’s declines in manufacturing and the mining and quarrying sector were attributed to one-off factors like production disruptions, he noted.

“It’s part of the broader volatility that we’ve seen in Canadian growth,” Mr. Ercolao said.

Trump expects Canada to cave in trade war as Stelco cites tariffs for layoffs

Offsetting the weakness in July was a 1.3-per-cent-gain for the construction sector, which marked its fourth consecutive month of growth after declines in late 2025 and early 2026.

Statscan also said a 1.7-per-cent surge in electricity generation, transmission and distribution powered the utilities sector to its strongest month of growth all year. A July heat wave across many parts of the country drove up power demands for cooling, the agency said.

On the other side, declines in July were spread across manufacturing, mining, quarrying and oil and gas extraction, as well as retail and wholesale trade.

Estimates for flat growth to start the third quarter come after Statscan projected an annualized growth rate of 3.3 per cent in the second quarter.

Newly revised data showed GDP was actually up 0.4 per cent in June, compared with earlier estimates of 0.3 per cent.

Statscan expects the economy picked back up with a gain of 0.2 per cent in August, but those early figures will be revised next month.

The August GDP figures will partially capture the impact of new 50-per-cent U.S. tariffs applied on a range of Canadian goods starting Aug. 22.

“The August pickup reinforces our view that the Canadian economy was enjoying a decent mid-year recovery before the latest U.S. tariffs took effect,” said Peter Shannon, senior economist at KPMG, in a note.

Mr. Shannon said he expects the bite from the new U.S. duties to meaningfully hit in September and take full effect in the fourth quarter. KPMG projects GDP will be about half a percentage point lower over the course of a year should the tariffs remain in effect.

Tuesday also marks the beginning of new retaliatory U.S. bans on Canadian products such as alcohol, dairy products and motorcycles.

Mr. Ercolao said the up-and-down nature of Canadian growth reflects that the economy has settled into a “sawtooth” pattern since the start of last year.

He said he expects August’s GDP figures will also get a boost from the latest trade swings. Some U.S. importers were likely rushing to get ahead of new tariffs on Canadian goods early in the month, but that lift will reverse come September.

Hits to manufacturing and wholesale trade in July also suggest the trade dispute continues to weigh heavily on vulnerable sectors, Mr. Ercolao said.

“You take it all together and the biggest take-away is that Canada appears to be (settling) into a more moderate growth pattern after a quite robust second quarter,” he said.

Benjamin Reitzes, BMO’s managing director of Canadian rates and macro strategist, said in a note to clients Tuesday that the August advance has him tracking GDP growth of 1.5 to 2 per cent in the third quarter of the year. That’s roughly in line with the Bank of Canada’s forecast for 1.5 per cent in the quarter, he noted.

The Bank of Canada will get a look at new jobs and inflation data for September, as well as a read of its own quarterly surveys of businesses and consumers, before making its next interest rate announcement on Oct. 28.

Mr. Reitzes suggested these data prints will be more impactful for the central bank’s decision than the July GDP release.

Uncertainty from U.S. trade policy could halve fourth-quarter growth, Macklem says

The Bank of Canada has held its benchmark interest rate steady at 2.25 per cent for nearly a year.

Monetary policy-makers are trying to support the economy through tariff impacts but have signalled they’re prepared to raise the policy rate if there are signs inflationary pressures are spreading beyond the gas pumps.

Bank of Canada deputy governor Toni Gravelle said during a fireside chat at a Bloomberg event in New York City on Tuesday that the central bank finds itself in a “true dilemma” trying to balance the energy price shock against the recent escalation of the U.S. trade dispute.

Gravelle said one of the things the bank’s governing council would be evaluating heading into the October rate decision is how “sustained” the second-quarter recovery has been. General inflation risks will also increase the longer oil prices stay high, he added.

Mr. Ercolao said he doesn’t see Tuesday’s release as moving the needle for the Bank of Canada, which he expects will remain on pause for the rest of the year before starting to raise the policy rate in 2027.

Financial markets are increasingly pricing in Bank of Canada rate hikes as persistently high oil prices stoke fears of stubborn inflation. Odds of a hike at the end of next month stood at 53 per cent as of Tuesday afternoon, according to LSEG Data & Analytics.

Mr. Ercolao said he doesn’t think monetary policy-makers will be in a rush to raise rates as they navigate a soft economy and inflationary risks.

“In balancing these two factors, we do think that they have a little bit more time afforded to sit on the sidelines, see how the recent or the upcoming data evolves, and then make policy decisions based on that,” he said.

U.S. inflation increased less than expected in August, which could see financial markets further reduce the odds of another interest rate increase from the Federal Reserve next month.

The Personal Consumption Expenditures Price Index rose 0.3 per cent last month after a downwardly revised 0.1 per cent gain in July, the Commerce Department’s Bureau of Economic Analysis said on Wednesday.

Economists polled by Reuters had forecast the PCE price index rising 0.4 per cent after a previously reported 0.2 per cent gain in July. In the 12 months through August, PCE inflation advanced 3.4 per cent after increasing by a downwardly revised 3.4 per cent in July.

PCE inflation was previously reported to have increased 3.7 per cent in July on a year-on-year basis. The BEA changed its methodology for calculating prices for software and accessories, portfolio management fees and legal services in the PCE price index. It also revised the inflation data going back to 2021.

Excluding the volatile food and energy components, the PCE Price Index climbed 0.2 per cent over the month after a downwardly revised 0.1 per cent rise in July. The so-called core PCE inflation was previously estimated to have gained 0.2 per cent in July.

Core PCE inflation increased 3.0 per cent year-on-year in August after a downwardly revised 3.0 per cent advance in July. Underlying inflation was initially estimated to have risen 3.3 per cent in the 12 months through July.

The U.Ss central bank tracks the PCE price measures for its 2-per-cent inflation target. The Fed this month raised its benchmark overnight interest rate to the 3.75 per cent-4.00 per cent range, the first rate hike in three years, and flagged further increases in borrowing costs in the months ahead.

The odds of an October rate hike were diminished by New York Fed President John Williams’ comments on Tuesday that he saw “no urgency” for further action. Prior to the inflation data, financial markets priced-in a roughly 51.5 per cent chance of further policy tightening next month down from 70 per cent on Monday, CME’s FedWatch Tool showed.

Higher inflation and borrowing costs could crimp consumer spending. A survey from the Conference Board on Tuesday showed consumer confidence plummeting to a near 12-½-year low in September. There are, however, no signs yet of consumers significantly dialing back.

Consumer spending, which accounts for more than two-thirds of economic activity, surged 0.9 per cent last month after a downwardly revised 0.1 per cent gain in July, the BEA said. Spending was previously estimated to have gained 0.2 per cent in July.

Prime Minister Mark Carney warned that pivoting our economy away from the U.S. would come at a cost to Canadians and the latest numbers show that’s true.

An Organization for Economic Co-operation and Development (OECD) report released last week downgraded Canada’s expected economic growth by 25% for this year and by almost the same amount in 2027 – 23.53% – compared to its last report in June.

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The OECD – representing the world’s 38 major industrialized market economies, including Canada and the U.S. – predicts Canada’s economy will grow by just 0.9% in 2026, down from its June prediction of 1.2%, and by 1.3% in 2027, down from 1.7% in June.

By comparison, it predicts the U.S. economy will grow by 2.2%, or more than double Canada’s 0.9% rate in 2026, and by 2.1%, or 61.5% higher than Canada’s 1.3% rate, in 2027.

In both cases, the OECD’s September numbers increase the predicted growth rate of the U.S. economy compared to June, up by 0.2 percentage points in 2026 and 0.3 percentage points in 2027, compared to declines of 0.3 percentage points in 2026 and 0.4 percentage points in 2027 in Canada.

The numbers reflect the fact that in a trade war between two countries, the country with the larger economy – the U.S. economy is 13 times the size of Canada’s – is better equipped to fight than the smaller one.

The OECD attributes Canada’s slower predicted economic growth to the impact of U.S. tariffs on Canadian exports to the U.S. and continuing uncertainty about the future of the Canada-U.S.-Mexico agreement on trade.

In addition, Canada faces long-standing structural problems in its economy, including low productivity.

On the plus side, the OECD said investments in artificial intelligence are boosting the Canadian economy to some extent, along with high oil prices resulting from the ongoing conflict in the Mideast, because Canada is a net energy exporter.

However the report also says high oil prices are contributing to Canada’s headline inflation rate, predicting it will come in at 2.8% for 2026, up from its June prediction of 2.4%, and 2.5% in 2027, up from 2.0%.

Carney told Canadians, after breaking off talks with the U.S. last month, that accepting U.S. President Donald Trump’s demands in the ongoing trade war the U.S. started would have undermined Canadian sovereignty and been more costly over the long term than his strategy of pivoting to increased trade with other countries and building up Canadian infrastructure.

Raising the OECD numbers in the House of Commons last week, Conservative MP Sandra Cobena said Canada and France were the only two G7 countries that had their economic growth forecasts downgraded in the latest OECD report, while they went up in the five other G7 nations.

She said the major infrastructure projects needed to diversify the Canadian economy are years, if not decades, away from completion when Canadians need help with the cost of living now.

“They (the Liberals) are all talk and no results,” Cobena said during question period.

“This Liberal government announces with urgency, but delivers at a crawl. When will they adopt our Conservative action plan so Canadians can afford to live again?”

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(Released in April by Conservative Leader Pierre Poilievre, the action plan proposes a wide range of tax cuts, scrapping laws passed by the Liberals the Conservatives say impede Canada’s economic growth, and would further streamline the process for approving major infrastructure projects beyond what the Liberals are doing.)