Canada's Services Sector Contracts for Fourth Straight Month in September
Canada's services economy shrank again in September as tariffs and conflict in the Middle East fueled uncertainty, though sentiment about future activity improved to a five-month high.
Canada’s services economy contracted for a fourth consecutive month in September, with the headline Business Activity Index rising to 48.3 from 46.8 in August but remaining below the 50 threshold that separates expansion from contraction.
Tariffs and the war in Iran were cited as primary causes for economic uncertainty, lower export trade, and increased operating expenses. The United States and Canada have adopted rounds of countertariffs since early 2025, and a U.S. import ban on many Canadian alcoholic beverages, motorcycles, and dairy products took effect last week relative to the report date.
The new business index stood at 48.5 in September, marking a fifth straight month below 50 and reflecting net reductions in output and new work across the sector. New export business declined at a steeper rate than in August, contributing to lower levels of export trade.
Cost pressures intensified during the month. The input price index rose to 62.2 in September from 61.7 in August, indicating that operating expenses were raised to an uncomfortably high degree.
Despite the current contraction, sentiment regarding future activity improved. The future activity index climbed to 61.4 in September from 56.4 in August, reaching a five-month high due to hopes that uncertainty could ease.
The broader S&P Global Canada Composite Purchasing Managers’ Index edged up to 48.7 in September from 47.8 in August but remained below 50 for a fourth month. Meanwhile, the S&P Global Canada Manufacturing PMI fell to a six-month low of 51.5 in September from 53.0 in August.