By Fergal Smith
TORONTO, May 5 (Reuters) - The downturn in Canada's services economy eased in April as the level of new business increased despite concerns about tariffs and the war in the Middle East, S&P Global's Canada services PMI data showed on Tuesday.
The headline Business Activity Index rose to 49.2 last month from 47.2 in March, marking the highest level since October.
Still, the index remained below the 50 no-change mark for a sixth straight month - a reading below 50 shows deterioration
in activity.
“Whilst Canada’s service sector continued to contract, it did so only marginally in April," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement. "Moreover, against the backdrop of tariffs and the war in the Middle East, overall performance wasn’t too bad when viewed in this context."
U.S. sectoral tariffs have badly hurt Canada's economy, while the surge in oil prices due to the war has raised the outlook for inflation globally.
The new business index moved above the 50 level for the first time since November 2024, hitting 50.3, up from 47.7 in March.
Confidence in the outlook rose to an 18-month high. Firms pointed to government initiatives supportive of wider economic growth in the year ahead, Smith said. Canadian Prime Minister Mark Carney's fiscal update last week committed billions of dollars in new spending on a new skilled worker program and infrastructure.
Higher fuel prices and tariffs contributed to higher input costs but the rate of increase eased from a nine-month high in March.
In response to higher costs, many firms chose to increase their own selling prices, S&P Global said. The prices charged index rose to a two-year high of 55.6, up from 54.4 in March.
The S&P Global Canada Composite PMI Output Index rose to 49.9 in April from 47.6 in March as the decline in service sector activity was offset by an increase in manufacturing output.
Data on Friday showed that the manufacturing sector expanded last month at the fastest pace in nearly four years as the war spurred stock building and added to inflation pressures. The S&P Global Canada Manufacturing PMI rose to 53.3 from 50.0 in March.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama )
