(Bloomberg) -- A gauge of manufacturing activity in Canada rose to 57.1 in June, the highest level since data began in late 2010, according to IHS Markit. The index was 56.2 in May.
Tariffs on steel and aluminum caused a record-breaking surge in order backlogs as firms scrambled to build up inventories, leading to longer delivery times. Average lead times from vendors lengthened by the greatest amount since the survey began, inflating the overall manufacturing gauge.
Manufacturers “suggested that part of the rise in new work reflected efforts by clients to complete orders and boost their inventories in advance of surcharges on steel and aluminum,” according to Tim Moore, IHS Markit.
Supply-chain pressures led to the fastest increase in input costs in over seven years. Since the end of 2015, the price index has increased almost 20 points. Factories have passed these increases on to customers as output prices advanced at the strongest rate since March 2011.
Survey respondents widely cited rising transportation costs and increased raw material prices (particularly for steel and aluminum) as the reason behind these higher prices.
Manufacturers damped growth projections for the year ahead as cost pressures and ongoing capacity constraints hurt business optimism.
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