Canada Service Activity Remains Weak

The S&P Global Canada Services PMI fell to 45.8 in January from 46.5, signalling a third consecutive monthly decline in service sector output. New business volumes contracted for a fourteenth straight month, with the latest drop the steepest since April. New export orders also declined, as some firms cited tariffs as making trade with the US unprofitable. Weak demand led to a sharp fall in backlogs, even as employment declined for a fifth month, though only modestly. Input costs rose sharply, driven by higher supplier prices and tariffs, while competitive pressures and weak demand limited firms’ ability to raise prices. Despite these conditions, business confidence remained positive, supported by expectations of stronger activity and easing trade uncertainty.

The S&P Global Canada Services PMI rose to 46.5 in December 2025 from 44.3 in November but remained in contraction territory. Apart from growth in October, the index stayed below the 50.0 no-change mark throughout 2025. Business activity fell as new work volumes fell for a thirteenth consecutive month, amid subdued demand and clients’ reluctance to commit to contracts. New export business remained weak, posting another sharp monthly drop. With activity and new orders under pressure, service providers continued to cut employment mainly through the non-replacement of leavers, marking the fourth straight month of job reductions. Despite softer demand, wage costs kept operating expenses elevated, prompting firms to raise selling prices for the eighth consecutive month. Inflation edged up but remained below earlier 2025 levels. Looking ahead, firms were optimistic about activity, though confidence stayed below its historical average amid uncertainty over tariffs and government policies.

The S&P Global Canada Services PMI fell to 44.3 in November from 50.5 in October, its lowest level since June, as demand weakened amid rising economic uncertainty. New business decreased sharply, with export orders posting the steepest drop in seven months. Firms were increasingly pessimistic, with expectations for future activity falling to a five-month low and staying well below trend. Employment declined for a third straight month, marking the sharpest drop since mid-2020, as companies cited cost pressures and higher wage expenses. Input price inflation remained elevated despite easing to a three-month low, driven by higher wages and tariff-related increases in goods such as food and metals. In contrast, selling prices rose only marginally, with output price inflation at a seven-month low.