Canada’s Services PMI Falls to Three-Month Low as Jobs Decline
Canada’s services economy contracted at a sharper pace in September, with employment falling and outstanding business activity dropping to its lowest level in five years, according to S&P Global data.
Services Activity Weakens Further
The headline Business Activity Index slipped to 46.3 in September, down from 48.6 in August, its lowest level since June. This marked the 10th consecutive month below the 50 threshold, signaling ongoing contraction in the services sector.
Paul Smith, economics director at S&P Global Market Intelligence, said service providers continued to face “a tough trading environment.” He highlighted “dual reductions in both employment and outstanding work,” which showed clear signs of excess capacity.
Employment and Work Backlogs Decline
The employment index dropped to 48.9, its first contraction since April. Meanwhile, the measure of outstanding business sank to 42.9, down from 46.3, and reached its lowest reading since June 2020.
Smith noted that the combination of falling jobs, excess capacity, and declining output reinforces downside risks for the Canadian economy. These conditions also support the Bank of Canada’s recent decision to cut rates.
Bank of Canada Policy Response
The Bank of Canada lowered its benchmark interest rate last month to 2.50%, a three-year low. Policymakers acted to counter economic weakness tied to the ongoing U.S.-led trade war.
Future Activity Shows Some Optimism
Despite current weakness, expectations for the future improved. The future activity index rose to 62.2 in September, an 11-month high, compared with 58.2 in August.
Broader Economic Pressure
The slowdown extended beyond services. The Canada Composite PMI Output Index dropped to 46.3 from 48.4, its weakest level since June.
Separately, data released Wednesday showed Canada’s manufacturing sector also contracted more sharply in September. The Manufacturing PMI fell to 47.7 from 48.3 in August, with new orders and production both under pressure.
