Canada's Service Sector Faces Sharp Decline as Manufacturing Shows Signs of Recovery
October 4, 2024
In September, the S&P Global Canada Composite PMI Output Index, which encompasses both manufacturing and services, declined to 47.0 from 47.8 in August, indicating a contraction in economic activity.
The services sector faced a significant downturn, with firms cutting jobs and new business activity plummeting to a near four-year low.
The new business index fell to 44.7, the lowest level since December 2020, while the employment measure also decreased to 47.7.
A PMI reading below 50 highlights the challenges within the service sector, signaling a deterioration in economic activity.
Paul Smith, economics director at S&P Global Market Intelligence, emphasized that September was particularly challenging for Canada's service sector, marked by declining activity and job losses for the second consecutive month.
The S&P Global Canada services PMI business activity index also decreased to 46.4 in September, down from 47.8 in August, further indicating a contraction.
Despite the downturn in current activity, confidence in the future economic outlook improved, with the future activity index rising to a six-month high of 62.7.
These trends suggest a softening labor market, slower inflation, and declining output, which may encourage the Bank of Canada to adopt a looser monetary policy.
Firms are anticipating further interest rate cuts in the coming months, believing these will help stimulate sales growth and overall economic activity.
Investors expect the Bank of Canada to lower its benchmark interest rate by 0.75% by the end of the year, reducing the current rate of 4.25%.
In contrast to the services sector, Canada's manufacturing PMI rose to 50.4 in September, marking its first reading above the no-change threshold in 17 months.
Overall, the data reflects a complex economic landscape in Canada, with significant challenges in the service sector juxtaposed against a recovering manufacturing sector.
Summary based on 1 source
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Investing.com • Oct 3, 2024
Canada's services PMI hits six-month low in September