Canada’s services economy remained under pressure in March, with S&P Global data showing a fifth straight monthly contraction as war-related uncertainty in the Middle East delayed client decision-making and rising fuel costs pushed operating expenses higher.
The S&P Global Canada Services Business Activity Index rose to 47.2 in March from 46.5 in February. That was the highest reading in five months, but it remained below the 50.0 threshold that separates expansion from contraction.
Demand conditions also stayed weak. The new business index improved to 47.7 in March from 46.9 in February, but remained below 50.0 for a 16th consecutive month, suggesting firms continued to face a prolonged stretch of declining sales pipelines, with clients still reluctant to commit to new work.
Paul Smith, economics director at S&P Global Market Intelligence, said March brought “another challenging month” for the sector, with activity and new business both falling again, though at slower rates than in recent months. He tied the result to the war in the Middle East, saying the conflict had created heightened uncertainty and delayed decision-making among clients.
This comes as cost pressures intensified. The Input Prices Index jumped to 62.3 in March from 57.1 in February, marking the highest level since June, attributed mainly to higher fuel and transportation costs as oil prices surge linked to the conflict.
Broader external pressures are also weighing on business conditions. Canada’s economy has been hit by U.S. sectoral tariffs and uncertainty around negotiations tied to CUSMA, which faces a July 1 review deadline.
However, the future activity index climbed to 61.9, its highest level in six months, showing that firms still expect conditions to improve over the coming year.
Beyond services, the S&P Global Canada Composite PMI Output Index edged up to 47.6 in March from 47.1 in February. Even with that improvement, the composite gauge stayed below 50.0 for a fifth straight month
S&P Global’s Canada Manufacturing PMI fell to 50.0 in March from 51.0 in February, indicating that factory conditions stagnated after slight expansion the month before. Together, the manufacturing and services readings show a private sector still struggling to regain momentum as war-related uncertainty, trade friction, and cost inflation continue to weigh on Canadian business activity.
Information for this briefing was found via Reuters and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
