This is the first positive reading in the Canadian services PMI since last November, though it wasn't exactly robust and the commentary in the report was poor:
- Latest prices data showed another round of steeply rising operating expenses, although competitive pressures meant the degree of cost pass through to clients remained relatively subdued.
- Suppliers were reported to be raising their charges
- Staffing levels also fell as firms generally chose not to replace any leavers
- new business declined for an eleventh month running
- Backlogs of work declined steeply whilst confidence in the outlook was again below trend
Paul Smith, Economics Director at S&P Global Market Intelligence, said:
“October’s survey data signalled a return to (admittedly marginal) growth of Canada’s service sector amid some evidence of a stabilisation in the business environment. However, whilst welcome, growth realistically failed to make up for the sustained period of contraction seen through much of 2025 and should be viewed in the context of the continued uncertainty and client hesitancy that still plagues market demand.
“Political and economic uncertainty, especially in relation to trade policies, also continues to dominate the outlook with confidence amongst firms remaining sub-par in October. That helped to explain why companies were again reluctant to replace any leavers, especially given evidence of continued spare capacity in the sector.
“Against this backdrop of soft employment and economic activity trends, and with selling price inflation remaining below trend, the latest PMI data once again provide a timely reminder of why the Bank of Canada loosened monetary policy again last week.”
The inflation commentary should make the Bank of Canada anxious. If they're forced to reverse course and hike rates, it would certainly plunge the economy into a recession.
