By Fergal Smith

Canada’s Services Economy Contracts for Third Month

TORONTO (Reuters) – Canada’s services economy contracted for a third straight month in August as firms employed fewer workers and wildfires contributed to a slowdown in new business, according to S&P Global Canada services PMI data released on Thursday.

The headline business activity index edged up to 47.8 from 47.3 in July but remained significantly below the 50 no-change threshold, indicating reduced activity.

“The performance of Canada’s services economy remained subdued in August, with concurrent solid declines in both activity and new business signaled by the survey,” said Paul Smith, economics director at S&P Global Market Intelligence, in a statement.

Firms reported slow market conditions and a general lack of demand, with some noting the negative impact of wildfires on their businesses.

The new business index fell to a six-month low of 47.6, down from 49.2 in July, while the measure of employment dropped below 50 for the first time since last December.

Hundreds of wildfires have ravaged the western provinces of Alberta and British Columbia in recent months, threatening critical infrastructure and forcing the evacuation of several communities.

Companies were also cautious about the outlook, expressing concerns that borrowing costs will remain elevated despite expectations of rate cuts in the coming months, according to Smith.

The Bank of Canada recently cut its benchmark interest rate for the third time since June, lowering it by 25 basis points to 4.25%.

The S&P Global Canada Composite PMI Output Index, which encompasses both manufacturing and service sector activity, rose to 47.8 last month from 47.0 in July, marking its highest level since May.

Data released on Tuesday showed that Canada’s manufacturing PMI was 49.5 in August, up from 47.8 in July.