Canada’s services sector contracts for fifth month

Canada’s services economy shrank for a fifth consecutive month in March, as uncertainty stemming from the war in the Middle East dampened new business and rising fuel costs pushed up operating expenses, S&P Global data showed on April 6.

The S&P Global Canada Services Purchasing Managers’ Index (PMI) Business Activity Index rose to 47.2 in March from 46.5 in February — its highest level in five months — but remained below the 50 threshold that separates growth from contraction, Reuters reports.

“Another challenging month for Canada’s service sector was signalled during March, with activity and new business again falling, albeit at slower rates compared to recent months,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

He noted that heightened uncertainty linked to the Middle East conflict had delayed client decision-making, though firms expect activity to rebound if the situation improves.

The war has driven oil prices higher, adding to global inflation pressures. Canadian businesses also continue to face strain from U.S. sectoral tariffs and uncertainty surrounding negotiations over the United States-Mexico-Canada Agreement (USMCA), which is due for review by a July 1 deadline.

The new business index remained in contraction for a 16th straight month, inching up to 47.7 from 46.9 in February. Meanwhile, the Input Prices Index jumped to 62.3 — its highest since June — from 57.1, reflecting increased fuel and transportation costs.

A measure of future activity offered some optimism, climbing to a six-month high of 61.9.

The broader S&P Global Canada Composite PMI Output Index, which combines services and manufacturing, rose slightly to 47.6 from 47.1, marking its fifth consecutive month below 50. Separate data showed manufacturing activity stagnated in March, with the Manufacturing PMI falling to 50.0 from 51.0 in February.

By Sabina Mammadli