CIBC Sees Opportunities for Canada's Manufacturing to Reduce Gap With U.S.

08:01 AM EST, 01/29/2026 (MT Newswires) -- United States manufacturing gross domestic product is almost 10% above its pre-COVID level, while the Canadian manufacturing GDP has yet to reach 2019 levels, said CIBC.

The U.S. performance isn't only stronger but it's also much more capital-intensive, wrote the bank in a note to clients. This has major implications not only for productivity and profitability -- capital-intensive manufacturing -- firms are more profitable, but also for the extent to which policy makers should focus on job growth as an indicator of economic health in the sector.

This is just the beginning, according to CIBC, as the rapid pace of Artificial Intelligence technology adoption means that capital intensity in U.S. manufacturing will rise even faster in the coming years.

However, the rapid increase in U.S. capital-intensive manufacturing activity was financed largely by debt, pointed out the bank. Since 2019, liabilities of capital-intensive firms have risen by 18%, compared with 11% among low capital-intensive companies, bringing their share in total manufacturing liabilities to 57%.

That increased sensitivity to debt might not be an issue at the moment with the Federal Reserve likely to ease policy in the coming quarters, but it might generate a mild headwind after that -- certainly relative to less indebted Canadian manufacturing firms, added CIBC.

There is little doubt that capital intensity in manufacturing will continue to rise in the coming years, stated the bank. Forces such as deglobalization, just-in-case inventories, and tightening labor markets will force firms to exchange labor with capital, and the new technological revolution that is taking place will work to dramatically accelerate that process.

Canadian manufacturing chief executive officers cannot ignore this reality, noted the bank.

It's hard to see Canadian manufacturing closing the gap with the U.S. anytime soon. But a comparatively lower sensitivity to interest rates, and the fact that the current low rate of capital intensity in Canadian manufacturing suggests plenty of low-hanging fruit available, might lead to improved momentum in production in the coming years, said CIBC.

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