Canada Services PMI Remains in Contraction Territory Despite Rise to 46.8 in September

By Robb M. Stewart

Activity in Canada's services industry continued to weaken last month despite some signs of improvement, data released Monday showed.

The S&P Global Canada services purchasing managers index rose to 48.3 in September after falling to 46.8 the month before, though for a fourth straight month came in below the 50 threshold separating contraction from expansion.

"September once again proved to be a difficult month for businesses," said Paul Smith, economics director at S&P Global Market Intelligence.

Declines were again closely associated with tariffs and the war in Iran, which Smith said resulted in a high degree of uncertainty, lower levels of export trade and a rise in operating expenses. "Margins also came under renewed pressure as market competition restricted pricing power," he added.

Canada's economy is expected to have cooled in the third quarter after a strong rebound the quarter before. Industry-level gross domestic product was flat in July, snapping three straight months of expansion. Early data has pointed to growth of 0.2% in August from the month before, with a recovery in mining and retail trade partially offset by further declines in oil-and-gas extraction.

Manufacturing activity in Canada softened in September but remained in expansion territory for a sixth month running, with S&P Global's purchasing managers index for the sector cooling to 51.5. Factory output rose and companies showed a willingness to fill vacancies with skilled workers to support recent long-term contracts, but tariffs and elevated global energy prices due to the war in Iran continued to have a damaging effect on manufacturing.

S&P Global's services survey showed activity in the sector and new business fell, though at slower rates compared with August. Levels of new work fell for a fifth consecutive month, and S&P Global said companies again pointed to tariffs and trade tensions with the U.S. as a reason for the modest reduction in new work and a sharper fall in new export business.

Overall operating expenses were reported to have again risen sharply. Due to cost pressures and declining levels of activity and new business, companies were generally reluctant to replace any departing staff last month. Services employment was down for the first time in four months, and Smith said the rate of reduction was the steepest of the year so far and exacerbated by reports of difficulties in finding suitably skilled workers to fill vacancies.

There was marginal increase in work outstanding, marking the first time a rise in outstanding business has been registered since June 2022, S&P Global said.

Despite the challenges, service providers were more upbeat about the future during September. The survey found overall sentiment improved to its highest level since April. Confidence was in some cases linked to hope of a retreat in uncertainty in the coming year, while other companies signaled plans to increase commercial activity, recruit new staff or start new projects, S&P Global said.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 05, 2026 10:18 ET (14:18 GMT)