Canada’s services sector contracted at a faster pace in September, hitting a three-month low, as businesses reduced headcounts and outstanding work dropped to its weakest level in five years, according to S&P Global’s latest services PMI data released on Friday.
The headline Business Activity Index slipped to 46.3 in September from 48.6 in August — its lowest reading since June and the 10th consecutive month below the 50-point threshold, signaling a continued downturn.
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“Canada’s service providers continued to face challenging conditions in September,” said Paul Smith, economics director at S&P Global Market Intelligence. “Signs of excess capacity were clear, reflected in simultaneous declines in both employment and backlogs of work.”
The employment index fell to 48.9, entering contraction territory for the first time since April, while the outstanding business index dropped to 42.9, its lowest since June 2020.
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Smith added that the combination of falling employment, weaker activity, and excess capacity keeps economic risks skewed to the downside, reinforcing the Bank of Canada’s recent decision to cut its benchmark interest rate to 2.50%, the lowest in three years, to support the economy amid trade headwinds.
Despite the current weakness, sentiment improved, with the future activity index climbing to 62.2, an 11-month high, up from 58.2 in August.
Meanwhile, Canada’s manufacturing sector also contracted more sharply in September. The S&P Global Canada Manufacturing PMI dropped to 47.7 from 48.3 in August, as global trade uncertainty weighed on production and new orders.
The S&P Global Canada Composite PMI Output Index fell to 46.3 from 48.4, marking its weakest level since June, underscoring broad-based softness across both services and manufacturing sectors.
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