Canada's services sector contracted for a fourth straight month in September, with S&P Global's Business Activity Index still stuck below the 50 growth threshold even as it improved from August. Tariffs and the war in Iran kept weighing on output and new business, even as firms grew more hopeful about the months ahead.
Canada's services economy contracted for a fourth straight month in September, as tariffs and the war in the Middle East kept businesses on edge. The headline Business Activity Index rose to 48.3 last month from 46.8 in August, S&P Global's PMI data showed, but it stayed below the 50 mark that separates expansion from contraction.
Tariffs and the war in Iran keep pressure on output
Paul Smith, economics director at S&P Global Market Intelligence, said businesses faced another tough stretch, with net reductions in output and new work both signalled: "September once again proved to be a difficult month for businesses". He tied the declines to tariffs and the war in Iran, which raised uncertainty, cut export trade and pushed operating expenses higher.
The United States and Canada have adopted rounds of counter-tariffs since early 2025, and a US import ban on many Canadian alcoholic beverages, motorcycles and dairy products took effect last week. New business for services firms fell too: the new business index read 48.5, below 50 for a fifth consecutive month, as new export business declined at a steeper rate than in August.
Costs rise, but sentiment improves
Cost pressures kept building: the input price index rose to 62.2 from 61.7 in August. Still, hopes that the uncertainty could ease lifted sentiment, and the future activity index climbed to 61.4 from 56.4 in August, a five-month high.
The broader picture stayed weak. The S&P Global Canada Composite PMI edged up to 48.7 in September from 47.8 in August, stuck below 50 for a fourth straight month. Separate data released Thursday showed the Manufacturing PMI fell to a six-month low of 51.5 last month from 53.0 in August.
Source: Investing.com
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