Canada's manufacturing sector expanded in June at its fastest pace in more than seven years amid stronger output growth and higher sales volumes, according to data from IHS Markit.

The IHS Markit Canada manufacturing purchasing managers' index rose to a reading of 57.1 last month from 56.2 in May. It was the highest reading since the survey was started in October 2010.

Manufacturers reported the fastest growth in production levels for five months in June, supported by increased capacity and rising workloads, IHS Markit said. New work also expanded at the strongest pace since November 2013 amid greater local and foreign demand, particularly from the U.S.

"Survey respondents commented on a general upswing in customer demand and ongoing efforts to boost production capacity," said IHS Markit associate director Tim Moore. "Manufacturers also 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."

However, manufacturers notably mentioned higher prices for steel and aluminum, which contributed to the fastest increase in average cost burdens in more than seven years, according to IHS Markit.

Canada's reciprocal tariffs on C$16.6 billion worth of U.S. steel and aluminum products took effect on July 1, in response to Washington's implementation of metal import duties.

Despite the heightened trade tensions, Canadian manufacturers are upbeat about their growth prospects for the next 12 months, IHS Markit said. The degree of optimism in June, however, was the lowest since March.