Canada's Services Economy Contracts in June, Inflation Pressures Cool - S&P Global PMI Data
By Fergal Smith
In June, Canada's services economy slipped back into contraction as a decline in new business weighed on the sector's performance, according to S&P Global Canada services PMI data. The headline business activity index fell to 47.1 from 51.1 in May, marking its lowest level since March.
A reading below 50 signals deterioration in activity, and this was the first time in a year that the index had been above the 50 threshold. Paul Smith, economics director at S&P Global Market Intelligence, stated, "Following a return to growth in May, Canada's services economy slipped back into the moribund trend that has characterized its performance in the post-pandemic period."
Both activity and new business fell at solid rates, with the new business index dropping below the 50.0 no-change mark for the first time in three months. Additionally, the measure of outstanding business was at its lowest level since December 2020.
However, there was some positive news in the data as both input and output price inflation slowed, potentially contributing to the Bank of Canada's confidence that inflation pressures are contained. Last month, the BoC became the first G7 central bank to begin cutting interest rates.
The S&P Global Canada Composite PMI Output Index, which includes both manufacturing and service sector activity, also fell into contraction in June. Data on Monday showed that Canada's manufacturing PMI matched the level posted in May.
In summary, the data indicates a challenging environment for Canada's services economy, with declining new business and activity levels, as well as easing inflation pressures. This could have implications for the overall economic outlook and monetary policy decisions moving forward.