Canada's Services Sector Contracts for Fifth Consecutive Month in October 2026
Canada's services sector contracted for a fifth straight month in October 2026, with the S&P Global Business Activity index falling to 48.1. Ongoing trade uncertainty with the United States, rising input prices, and weak demand weighed on the sector, while manufacturing also slipped into contraction territory.
Canada’s services economy contracted for a fifth consecutive month in October 2026, as ongoing trade uncertainty with the United States, rising costs, and weak demand continued to weigh on the sector.
The headline Business Activity index for Canada's services sector edged lower to 48.1 in October from 48.3 in September, according to data from S&P Global. A reading below 50 on the Purchasing Managers’ Index (PMI) indicates contraction.
Paul Smith, economics director at S&P Global Market Intelligence, cited economic uncertainty linked to the Canada-U.S. trading relationship and rising prices as factors undermining demand and confidence. The United States is the destination for about 70 per cent of Canada’s exports.
New business volumes declined further during the month. The new business index dipped to 48.0 in October from 48.5 in September, while new export business posted its steepest decline since November 2025.
Cost pressures intensified across the services sector. The input prices index rose to a three-month high of 63.9 in October from 62.2 in September, driven by fuel surcharges, transportation costs, and tariffs. Despite these elevated costs, firms had limited ability to pass increases on to clients due to weak demand. The prices charged measure remained unchanged at 53.4 in October compared to September.
Business sentiment regarding future activity also deteriorated. The future activity index fell to 57.7 in October from 61.4 in September, reflecting subdued expectations among service providers.
The broader private sector mirrored the weakness seen in services. The S&P Global Canada Composite PMI declined to 48.1 in October from 48.7 in September. The S&P Global Canada Manufacturing PMI dropped to 49.6 in October from 51.5 in September, marking its first move below the 50 threshold this year and indicating that the manufacturing sector has also entered contraction territory.