Manufacturing sector shows ‘tentative signs of a recovery’ in July, economist says

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A rise in manufacturing sales in July could indicate early signs of a recovery after the sector was hit hard by tariffs, one economist says.

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Statistics Canada reported on Monday that manufacturing sales rose 2.5 per cent to $70.3 billion in July, helped by strength in the transportation equipment subsector.

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Sales of transportation equipment rose 8.6 per cent to $11.4 billion, boosted by an 11.4 per cent increase in sales of motor vehicles and a 7.2 per cent gain in motor vehicle parts, the agency said. Aerospace products and parts sales also rose 6.5 per cent.

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“The increases in manufacturing and wholesale sales in July suggest tentative signs of a recovery in two of the sectors hardest hit by U.S. tariffs,” said Thomas Ryan, North America economist at Capital Economics, in a note on Monday.

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July’s increase in manufacturing sales marked the second consecutive month of gains after a 0.3 per cent increase in June.

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“This points to a nascent turnaround in the sector after the sustained U.S. tariff-driven weakness in February-May,” he said.

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Ryan highlighted that primary and fabricated metals sales both rose by four per cent month-over-month, “suggesting the two sub-sectors hardest hit by U.S. tariffs have moved past the worst of their struggles.”

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U.S. President Donald Trump introduced 25 per cent tariffs on all imports of steel and aluminum in March this year, and doubled them to 50 per cent in early June. The move prompted a response from the Canadian government, including counter-tariffs on steel, aluminum and autos that remain in effect amid negotiations.

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Meanwhile, StatCan said sales for the petroleum and coal products subsector climbed 6.2 per cent to $7.2 billion in July.

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On a constant dollar basis, manufacturing sales gained 1.6 per cent month-over-month in July.

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In a separate report, Statistics Canada said wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 1.2 per cent to $86 billion in July.

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In volume terms, wholesale sales, excluding those items, increased 0.8 per cent in July.

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While the rise in manufacturing and wholesale sales suggest a rebound is underway, Ryan said he expects it to be a slow process.

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Specifically, data that was less encouraging included a 2.2 per cent decline in new orders as well as a reading from the S&P Global Manufacturing Purchasing Managers’ Index below 50, indicating a contraction.

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Despite the monthly increase, StatCan said total manufacturing sales were still down 1.7 per cent on a year-over-year basis.

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This report by The Canadian Press was first published Sept. 15, 2025.

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