By Fergal Smith
TORONTO (Multibagger) - In September, Canada's services economy experienced a significant downturn, with firms cutting jobs and new business falling to a near four-year low, according to S&P Global Canada services PMI data released on Thursday.
The headline business activity index dropped to 46.4 from 47.8 in August, marking the lowest level since March. A reading below 50 indicates a decline in activity.
"Canada's service sector faced a challenging month in September, with a notable decrease in activity and new business volumes, along with job losses for the second consecutive month," said Paul Smith, economics director at S&P Global Market Intelligence.
The new business index fell to its lowest level since December 2020 at 44.7, down from 47.6 in August, while the employment measure declined to 47.7 from 49.4.
"The combination of weakening labor market conditions, slower inflation, and declining output supports the Bank of Canada's strategy of implementing looser monetary policies," Smith added.
"Firms are anticipating further rate cuts in the upcoming months, which are expected to stimulate sales and activity growth in the coming year."
Despite the challenges, confidence in the future outlook remains positive, with the future activity index reaching a six-month high of 62.7.
Investors are predicting that the Bank of Canada will decrease its benchmark interest rate by three-quarters of a percentage point by the end of the year, matching the easing measures taken since June. The current policy rate stands at 4.25%.
The S&P Global Canada Composite PMI Output Index, which covers both manufacturing and service sector activities, decreased to 47.0 last month from 47.8 in August.
Recent data revealed that Canada's manufacturing PMI for September was 50.4, surpassing the 50 no-change threshold for the first time in 17 months.
Analysis:
The article highlights the challenges faced by Canada's services sector in September, with a significant decline in business activity, new business volumes, and employment levels. The data suggests a need for looser monetary policies to stimulate growth. Despite these challenges, confidence in the future outlook remains positive. Investors are anticipating further rate cuts by the Bank of Canada, which could impact sales and activity growth in the coming year. Overall, the article underscores the importance of monitoring economic indicators and policy decisions for informed financial planning.