By Fergal Smith
TORONTO (Reuters) – Canada’s services economy deteriorated for the first time in three months in December as a postal workers’ strike weighed on activity and work outstanding tumbled, S&P Global’s Canada services PMI data showed on Monday.
The headline business activity index fell to 48.2 from 51.2 in November, moving below the 50.0 no-change mark for the first time since September. A reading below 50 shows a contraction in activity.
“Canada’s services economy ended 2024 on a subdued note,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“The downturn was somewhat exacerbated by postal strikes, although underlying demand was nonetheless reported to have disappointed, with clients said to be cautious and unwilling to commit to new work as 2024 ended.”
A month-long strike by Canadian postal workers ended in mid-December after the country’s labor relations board ordered an end to the work stoppage.
The new business index fell to 46.4 from 50.1 in November and the measure of new export business was at 39.7, its lowest level since December 2020.
U.S. President-elect Donald Trump has threatened to impose a 25% tariff on all imports from Canada.
“A high degree of excess capacity was also apparent in the services economy, with firms easily able to keep on top of their workloads according to the latest PMI data,” Smith said.
The outstanding business index fell to its lowest level in four years at 44.6. The level of economic slack has worried the Bank of Canada, which last month slashed its benchmark interest rate by half a percentage point to 3.25%.
The S&P Global Canada Composite PMI Output Index fell to 49.0 last month from 51.5 in November as the downturn in the services economy offset a fourth straight month of increased factory activity.
Data last Thursday showed that Canada’s manufacturing PMI rose to a 22-month high of 52.2 in December as inventory accumulation by U.S. clients in anticipation of trade tariffs provided a measure of support for export sales.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama)
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