Toronto/CMEDIA: Canada’s services economy reportedly shrank in March for a fifth straight month owing to the Middle East crisis.
A decline in new business, and increased operating expenses were seen as revealed by the S&P Global’s Canada services PMI data on Monday.
“Another challenging month for Canada’s service sector was signaled during March, with activity and new business again falling, albeit at slower rates compared to recent months,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“The impact of the war in the Middle East has led to heightened uncertainty and delayed decision making amongst clients, although firms are confident that a swift resolution would lead to an uplift in activity.”
With an increase of the headline Business Activity Index to 47.2 last month from 46.5 in February marking the index’s highest reading in five months but remained below the 50 which shows deterioration in activity.
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The war has led to a hike in oil prices and raised the outlook for inflation globally.
Having been badly hurt by U.S. sectoral tariffs, Canada’s economy was also affected by the uncertainty in negotiations around the United States-Mexico-Canada Agreement, a North American trade pact, which is set for review by a July 1 deadline.
Although the new business measure edged up to 47.7 from 46.9 in Feb, it remained in contraction for a 16th straight month
“The present business environment is clearly challenging, with firms reporting a steep increase in their operating expenses over the month, driven mainly by increased fuel and transportation costs,” Smith said.
In spite of the rise of the Input Prices Index to 62.3, the highest level since June and up from 57.1 in Feb, the future activity index, which rose to a six-month high of 61.9.
The S&P Global Canada Composite PMI Output Index edged up to 47.6 in March from 47.1 in February, registering its fifth consecutive month below the 50 threshold.
