FX.co ★ Canada Services Activity Remains in Steep Contraction

The S&P Global Canada Services PMI experienced a slight increase, reaching 41.5 in April 2025 up from 41.2 the prior month. This denotes a continued contraction in Canada's services sector, marking the fifth consecutive month of decline at a notably sharp rate. Both new business inflows and overall output saw decreases nearly aligning with the near five-year lows recorded in March. The uncertainty surrounding economic conditions and political factors, notably the US tariffs and the looming general election, prompted a 'wait-and-see' stance among clients. As a result, companies reported job reductions for the fourth month in a row due to excess capacity. On the pricing front, operating expenses saw a significant increase, despite a decline in input cost inflation to a three-month low. This increase was largely due to rising wage bills and tariff-induced increases in supplier prices. Due to these pressures, companies were prompted to reduce selling prices for the first time since March 2021. While business confidence showed a slight recovery from the low point in March, it remained historically low given the persistent uncertainties.