Canada Services PMI Remains in Contraction

The S&P Global Canada Services Business Activity Index rose to 48.3 in September 2026 from 46.8 in August, remaining below the critical 50.0 no-change mark. Canada’s service sector continued to face a challenging business climate, with activity and new business falling at slower rates amid uncertainty over tariffs and the war in Iran. Tariffs and elevated energy prices also drove a sharper increase in operating costs, but strong competitive pressures limited firms’ ability to pass these costs on to clients, with output price inflation falling to a seven-month low. Staffing levels declined in response to weaker activity and new business, exacerbated by difficulties finding suitably skilled workers. However, firms became more confident about the outlook, with sentiment reaching its highest level since April.

Canada’s S&P Global Services PMI fell to 46.8 in August 2026 from 49.1 in July, marking a third consecutive month of contraction in service-sector activity and the steepest decline since February. Activity and new business volumes fell at faster rates as ongoing uncertainty kept clients reluctant to commit to new contracts. Business confidence about the year ahead dropped to its lowest level in more than a year, with rising prices also seen as a threat to future performance. Tariffs and trade tensions with the US, along with the conflict in the Middle East and resulting volatility in international energy prices, weighed on demand from both domestic and international clients. New export business declined at a solid, albeit slower, pace in August. Meanwhile, weak and competitive demand limited firms’ ability to raise selling prices. Employment was little changed during the latest survey period after two months of modest growth.

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.