(Reuters) – Canada’s services economy contracted at a steeper pace in September as businesses shed jobs and outstanding work sank to a five-year low, S&P Global’s Canada services PMI data showed on Friday.
The headline Business Activity Index fell to 46.3 last month from 48.6 in August, registering its lowest reading since June.
It was the 10th straight month that the index was below the 50 threshold. A reading below 50 shows contraction in the sector.
“Canada’s service providers continued to endure a tough trading environment in September,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“Evidence of excess capacity in the services economy was highlighted by the dual reductions in both employment and work outstanding.”
The employment index fell to 48.9, its first move into contraction since April, and the measure of outstanding business was at 42.9, down from 46.3 and its lowest level since June 2020.
“Alongside excess capacity, falling employment and steeply declining activity, risks to the Canadian economy subsequently remain firmly tilted to the downside and therefore provides further supporting evidence for the recent cut in interest rates by the Bank of Canada,” Smith said.
The Bank of Canada last month lowered its benchmark interest rate to a three-year low of 2.50% to support the economy, which has been buffeted by the U.S.-led trade war.
Still, hopes of a more stable macroeconomic environment helped boost the future activity index to an 11-month high of 62.2, up from 58.2 in August.
The S&P Global Canada Composite PMI Output Index fell to 46.3 last month from 48.4 in August, marking its lowest level since June.
Data on Wednesday showed that Canada’s manufacturing sector contracted at a steeper pace in September as an uncertain trading environment weighed on production and new orders. The S&P Global Canada Manufacturing PMI fell to 47.7 from 48.3 in August.
