Canada Services PMI Remains in Contraction Territory, Ticking Up to 41.5 in April
SPGI
Published on 05/05/2025 at 10:12, updated on 05/05/2025 at 08:11
By Robb M. Stewart
Canada's services industry was in contraction territory for a fifth straight month, with activity continuing to be held back by the uncertainty of U.S. trade policy and ahead of the federal election.
The S&P Global Canada services purchasing managers index nudged up to 41.5 in April from 41.2 the month before, remaining below the 50 threshold separating growth from contraction.
Service-sector output and new business inflows declined at rates close to the near-five-year record pace seen in March, and job losses were recorded for a fourth successive month.
"Firms again linked these weak trends to widespread economic and political uncertainty, in turn linked to trade policies and, at the time of survey data collection, the general election," Paul Smith, economics director at S&P Global Market Intelligence, said.
Smith said service providers in the country are hopeful of a more stable business environment in a year's time but presently are seeing a lack of new work and excess capacity. Adding to their challenges, firms felt compelled to reduce output charges for the first time in more than four years despite input-price inflation remaining elevated as suppliers were again reported to be reevaluating their list prices, he said.
Canada's economy has lost momentum since it began the year on solid footing, and consumer and business confidence has faltered as concerns build over the expected fallout from the Trump administration's aggressive use of tariffs and the possibility of a recession this year.
Statistics Canada last week estimated industry-level gross domestic product ticked up a modest 0.1% from the month before in March, putting the economy on track for annualized growth of 1.5% in the first quarter after it expanded by a stronger-than-expected 2.6% in the final three months of 2024. The first rounds of President Trump's tariffs came into effect in March, and more followed in April.
A recovery in Canadian manufacturing activity in the final months of last year has ground to a halt, and S&P Global's manufacturing PMI for Canada has been in contraction territory three months running with a drop to 45.3 in April, the lowest level since May 2020.
Services companies reported sales volumes continued to deteriorate in April at a fast pace and they said clients were taking a wait-and-see approach, particularly in international markets, where U.S. tariff policy has led to a retrenchment in activity, S&P Global said. Its survey found that new export business again fell at a pace barely surpassed in more than seven years of data collection.
A lack of new work meant firms were generally willing to let employees leave without replacing them, and some surveyed companies noted forced layoffs at their units, S&P Global said. The firm said backlogs of work were reduced markedly yet again as capacity remained more than sufficient to deal with current workloads.
Write to Robb M. Stewart at [email protected]
(END) Dow Jones Newswires
05-05-25 1011ET