By Robb M. Stewart
Activity in Canada's services industry returned to contraction territory last month as a lack of new business weighed on a sector where sentiment has again weakened.
The S&P Global Canada services purchasing managers' index slipped to 47.1 in June, the lowest level since March and the 12th time in slightly more than a year the measure has been below the 50 threshold separating expansion from contraction. The business activity index fell from 51.1 in May.
"Following a return to growth in May, Canada's services economy slipped back into the moribund trend that has so far characterized its performance in the post pandemic period," Paul Smith, economics director at S&P Global Market Intelligence, said.
After stalling in the second half of last year, Canada's economy rebounded in the early months of 2024 even as inflation steadily cooled but the jobless rate has risen as hiring has been outpaced by rapid growth in the working-age population. The Bank of Canada last month became the first Group of Seven central bank to trim its policy interest rate, cutting it from what had been a more than two-decade high.
Canadian manufacturing activity remained in contraction territory last month, with the S&P Global Canada manufacturing PMI holding steady in June at 49.3. The manufacturing index has remained under the 50 mark for 14 consecutive months.
S&P Global's services industry survey showed broad weakness for June, with only the finance and insurance segment showing growth for the month.
New business volumes were down for the first month since March and S&P Global said companies pointed to insufficient market demand, associated with broader softness in economic conditions. Foreign demand remained weak, with sales to foreign clients down again and at the fastest pace since February, it said.
The data showed overall backlogs of work declined in June, extending the downturn in outstanding business to two years.
Labor expenses added to elevated cost pressures and there were reports of increases in supplier charges, though S&P Global said that despite weak sales and activity services providers again took on additional workers for a third consecutive month of rising employment.
They survey found that service industry confidence, while it remained positive, slipped for a fourth straight month and hit its lowest level since the start of the year, with concerns about the high cost of living and stretched household budgets squeezing demand over the coming 12 months.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
07-04-24 1017ET
