- Services activity declined, with the PMI at 47.2 (below 50 = contraction), though slightly improved from February at 46.5
- New business fell again, but the pace of decline eased to a 5-month low
- Geopolitical uncertainty (Middle East war) weighed heavily on demand, with clients delaying or pausing projects
- Input costs surged to a 9-month high, driven by fuel, transport, and labor costs
- Firms raised prices, but pricing power was limited due to weak demand and competition
- Employment declined for a 7th straight month, as firms cut staff or didn’t replace workers
- Business Services and Transport sectors saw the sharpest drops in activity
- Despite current weakness, confidence improved to a 6-month high, with hopes for geopolitical resolution and stronger demand ahead
Bottom line: The sector remains in contraction, pressured by war-driven uncertainty and rising costs, but there are early signs of stabilization and improved sentiment.
Paul Smith, Economics Director at S&P Global Market
Intelligence, said:
“Another challenging month for Canada’s service sector
was signalled during March, with activity and new
business again falling, albeit at slower rates compared
to recent months. 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.
“Nonetheless, 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. However, given subdued market demand,
firms’ own pricing power remains restricted leading
to only partial pass through of higher costs to clients
and therefore a squeeze in margins. Understandably
therefore service providers took the option to save on
expenses wherever possible, with any leavers generally
not replaced leading to another net fall in employment
over the month.”
The S&P Global Canada Services PMI is based on responses from roughly 400 service-sector companies across a range of industries and is designed to track month-to-month changes in business activity. It uses a diffusion index on a 0–100 scale, where readings above 50 indicate expansion and below 50 signal contraction. The primary measure is the Services Business Activity Index, which reflects changes in output, while the Composite PMI combines both services and manufacturing using GDP-based weights. The data is seasonally adjusted and provides a timely snapshot of economic momentum, with the 50 level serving as the key dividing line between growth and contraction.
