By Fergal Smith
TORONTO (Reuters) -Canada's services economy contracted for a ninth straight month in August as uncertainty over U.S. tariffs weighed on export sales and business confidence, S&P Global's Canada services PMI data showed on Thursday.
The headline Business Activity Index fell to 48.6 last month from 49.3 in July. A reading below 50 shows contraction in the sector.
“August marked another challenging month for the Canadian services economy with both activity and new work declining to greater
degrees than in July," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
"Uncertainty, especially related to tariffs, continued to have a noticeable detrimental impact on market activity and demand, according to service providers."
The new business index fell to 46.9 from 48.7 in July, while the measure of new export business was at 38.6, down from 44.2. That marked its lowest level since April as international clients showed reluctance to commit to new contracts.
The U.S. has imposed a 35% tariff on goods from Canada not covered by the U.S.-Mexico-Canada trade agreement and separate tariffs on strategic sectors, including steel, aluminum and autos. The USMCA officially comes up for review in July 2026.
"Unsurprisingly, tariff uncertainty also weighed on firms’ own confidence regarding the future, and the outlook for the sector clearly remains heavily contingent on how trade policies evolve in the coming months," Smith said.
The future activity index dipped to 58.2 from 60.9 in July.
One bright spot was the employment index, which held above the 50 threshold for the fourth month running. The measure of cost inflation hit a seven-month low even as companies reported that tariffs were leading to higher supplier charges.
The S&P Global Canada Composite PMI Output Index edged lower to 48.4 last month from 48.7 in July, marking its ninth straight month in contraction.
Data on Tuesday showed that Canada's manufacturing sector contracted in August but the pace of decline eased. The S&P Global Canada Manufacturing PMI edged up to 48.3 in August from 46.1 in July.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama )
