Canada Services PMI Remains in Contraction as Trade Uncertainty Weighs on Jobs and Spending

Canada’s services economy stayed in contraction territory in December, as mounting trade uncertainty continued to pressure employment and client activity, according to S&P Global’s latest services PMI released Tuesday.

The Business Activity Index rose to 46.5 from 44.3 in November, marking a modest improvement but remaining well below the 50-point threshold that separates expansion from contraction. With the exception of October, the index has been below 50 every month since December 2024.

Trade tensions were a key drag on activity. Negotiations on new sector-specific trade arrangements between the U.S. and Canada have stalled, while the United States-Mexico-Canada Agreement (USMCA) — which shields a large share of Canadian exports from U.S. tariffs — is due for joint review this year, adding to uncertainty for firms.

Employment conditions also remained weak. The employment index rose slightly to 47.7 from 47.1 in November, while new business recorded its 13th consecutive month of contraction, signalling persistent demand softness.

Some companies expressed optimism that large-scale events — including the FIFA World Cup 2026, which will be co-hosted by the U.S., Canada, and Mexico from June 11 to July 19 — could support future growth. However, S&P Global noted that overall sentiment remains well below historical averages.

Broader economic weakness was also evident across sectors. The S&P Global Canada Composite PMI Output Index rose to 46.7 in December from 44.9 the prior month, while separate data on Friday showed the manufacturing sector contracted for an 11th straight month.

The continued downturn suggests that Canada’s private-sector economy is still facing significant headwinds heading into 2026, particularly from trade-policy uncertainty and subdued domestic demand.