Canadas Services PMI Plummets to 5-Month Low: Tariff Concerns Grip the Economy

The spectre of tariffs has cast a long shadow over Canada's services economy, with the latest data from S&P Global revealing a deepening downturn in February. As firms hesitate to commit to new business, the headline Business Activity Index has fallen to a 5-month low of 46.6, marking the third consecutive month below the 50.0 no-change mark. This contraction is a stark reminder of the far-reaching consequences of trade uncertainty, with businesses and consumers alike feeling the pinch.

The Canadian service sector has been particularly hard hit by the threat of tariffs, with market activity grinding to a halt as clients wait with bated breath to see the size and scope of any changes to trade policies. According to Paul Smith, economics director at S&P Global Market Intelligence, "February saw the Canadian service sector hit hard by the spectre of tariffs being applied to all goods and services crossing the border with the U.S." This has resulted in a significant decline in new business, with the New Business Index plummeting to 45.1, down from 49.4 in January.

As the services sector struggles to come to terms with the new reality of trade uncertainty, businesses are adopting an increasingly cautious approach. This has led to a noticeable reduction in employment, with the Employment Index falling to 47.3, down from 48.3 in January. Furthermore, the measure of input prices has risen to a four-month high of 60.4, as a weaker Canadian dollar contributes to increased costs. The S&P Global Canada Composite PMI Output Index has also fallen to 46.8, marking the steepest contraction in output since January 2024. As the Canadian economy navigates these uncharted waters, one thing is clear: the impact of tariffs will be felt for a long time to come.