By Fergal Smith
TORONTO (Reuters) -Canada’s services economy contracted for a fifth straight month in April as uncertainty around trade policy and the Canadian general election weighed on activity, S&P Global’s Canada services PMI data showed on Monday.
The headline Business Activity Index was at 41.5 last month, edging up from a near five-year low of 41.2 in March but well below the 50.0 no-change mark that separates growth from contraction.
“Canada’s service sector economy faced another challenging month, with activity declining steeply and new business volumes again down sharply,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“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.”
The Liberal Party retained power in Canadian parliamentary elections on Monday but fell short of the outright majority that Prime Minister Mark Carney had sought to help negotiate with the United States on trade tariffs.
Canada sends about 75% of its exports to the United States, including steel, aluminum and autos which have been hit with hefty U.S. duties. The Bank of Canada says that a long-lasting global trade war could trigger a significant recession in Canada.
The New Business Index rebounded only slightly to 41.9 from 41.3 in March, while the measure of employment showed job losses for a fourth straight month.
“Adding to the woes of service providers, firms felt compelled to reduce their output charges for the first time in over four years,” Smith said.
The Prices Charged Index showed that selling prices declined for the first time since March 2021, which squeezed margins as input cost inflation remained high.
The S&P Global Canada Composite PMI Output Index fell to 41.7 last month from 42.0 in March, marking the steepest contraction in output since June 2020 when the COVID-19 pandemic was underway.
Data last Thursday showed a deeper contraction in Canadian factory activity in April. The S&P Global Canada Manufacturing PMI was at 45.3, down from 46.3 in March.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama)
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