Canada Services PMI Remains in Contraction

Canada's S&P Global Services PMI rose to 49.1 in July 2026 from 47.1 in June but remained below the 50.0 threshold, signaling a second consecutive, albeit milder, contraction in the services sector. Business conditions continued to be weighed down by tariffs and geopolitical tensions, which dampened both current activity and the outlook. Output and new orders declined again, though at a slower pace, while business confidence fell to its lowest level of 2026. Meanwhile, input cost inflation remained elevated, driven by tariffs, higher energy and fuel costs linked to the Middle East conflict, and rising labor expenses. Firms continued to raise selling prices despite weak demand, highlighting persistent inflationary pressures and risks to the broader economic outlook.

Canada's S&P Global Services PMI fell to 47.1 in June 2026 from 50.6 in May, signalling a contraction in the services sector and the steepest decline in activity since February. Business activity weakened as new orders fell for a second straight month, with firms citing high prices and geopolitical uncertainty as key factors weighing on domestic and foreign demand. Meanwhile, employment increased marginally as companies added staff to expand capacity, helping reduce backlogs of work at the fastest pace since January. On the price front, input cost inflation eased sharply from May's four-year high but remained elevated due to higher energy, fuel, and wage costs. Selling price inflation also moderated to a three-month low as weaker demand limited firms' pricing power. Business confidence deteriorated for a second consecutive month, falling to its lowest level since November 2025.

The S&P Global Canada Services PMI increased from 49.2 in April to 50.6 in May 2026, indicating renewed growth in the services sector after seven months of contraction and the strongest performance since November 2024. However, it was limited by a net reduction in new business volumes as economic uncertainty, especially in relation to the conflict in the Middle East, was weighing on market activity. This was the case for both domestic and international clients. Meanwhile, employment numbers were reduced marginally in response. Latest data also showed a noticeable acceleration of input price inflation, with costs rising at their fastest rate for four years on the back of increased fuel and wage expenses. Service providers raised their own selling prices, with inflation the highest since July 2023.