Canada's services economy shrank again in October, the fifth consecutive month below the 50 mark that separates growth from decline, according to S&P Global Canada data. The reading edged down slightly from September, and the composite measure covering both services and manufacturing also stayed in negative territory. Because services employ the most Canadians, the streak is a warning sign for the wider economy.

What is pulling the sector down?

S&P Global attributed the weakness to uncertainty over the Canada-U.S. trading relationship and to rising costs. New orders fell back below 50, and new export business recorded its steepest drop since November 2025, a concern for a country that sends roughly 70% of its exports south. Firms also cited Middle East conflict, which some said was prompting clients to postpone decisions.

Read also Carney and Champagne promote new federal budget across Canada

Costs are climbing faster than prices charged. The input price index rose to a three-month high of 63.9, reflecting fuel surcharges, transport costs and tariffs, while the measure of prices charged held at 53.4. That gap points to squeezed margins for service providers and keeps pressure on hiring and investment.

Are other indicators telling a different story?

Yes. The Ivey Purchasing Managers Index, a separate survey of purchasing managers across Canada, rose to a seasonally adjusted 58.3 in October from 58.2, its seventh straight month in expansion territory. Its employment gauge climbed to 58.3 from 56.5, while its prices index eased to 81.7 from 82.8.

The two surveys differ in method and coverage, so they can diverge. October's Labour Force Survey also showed softness in services employment, hours and wage growth, with goods-producing jobs providing the upside surprise, according to MNI.

What to watch next

  • Whether new export orders recover as trade talks with Washington proceed; the USMCA review is due by July 1.
  • Whether input costs keep climbing and force further price increases.
  • Whether the future activity index, which fell to 57.7 from 61.4, holds above 50.

S&P Global's Paul Smith has pointed to government initiatives as a factor in improved confidence, though the firm said geopolitical and trade risks keep the outlook uncertain.

FAQ

What does a PMI below 50 mean?

It signals that activity contracted compared with the previous month; a reading above 50 indicates expansion.

Why do the S&P Global and Ivey surveys disagree?

They cover different panels and are calculated differently, so one can show contraction while the other shows growth in the same month.