Canada's Service Sector Faces Sharp Decline as Manufacturing Shows Signs of Recovery

October 4, 2024
Canada's Service Sector Faces Sharp Decline as Manufacturing Shows Signs of Recovery
  • 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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Canada's services PMI hits six-month low in September

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