The number of orders placed by Canadian manufacturers has reached an all-time low, a new report shows. The manufacturing sector has been struggling with weak demand and the effects of COVID-19 are starting to spread to the services sector. Meanwhile, growth in China slowed sharply in the second quarter amid widespread lockdowns and a bleak global outlook. Now, Canada is poised to follow suit.

The Manufacturing Inventories Index registered a reading of 54.9 percent in June, slightly higher than May’s reading of 54.2 percent. The pace of expansion slowed, but four of six top industries expanded in June. While hiring and materials availability are showing signs of improvement, manufacturing inventories remain at low levels, with high employee turnover being the primary culprit. It is unclear what the impact of the slowdown will be on the overall economy.

The Employment Index fell from May’s reading of 49.6 percent to 47.3 percent in June, indicating a contraction in activity for the second consecutive month. While two big manufacturing sectors were expanding in June, turnover rates are still an issue. However, the large increase in hiring in June was offset by the fact that the employment index fell to its lowest level since August 2020.

According to the ISM(r) Backlog of Orders Index, Canadian factory activity has slowed for the fourth consecutive month. New orders remained weaker in June due to COVID-19 in China and war in Ukraine. Meanwhile, two large sectors – Machinery and Computer & Electronic Products – continued to expand at moderate-to-strong rates. But new orders have slowed in the last month as the price of raw materials has continued to rise.