Canada’s services economy contracts in June, hitting four-month low
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- Canada's services sector contracted in June as S&P Global's Business Activity Index fell to 47.1 from 50.6 in May, the lowest level since February and back below the 50 expansion threshold
- New business dropped to 47.5 from 49.8, while business confidence fell to its lowest since November, according to S&P Global economics director Paul Smith
- High selling prices dragged on demand, with the prices charged index pulling back to 54.5 from a nearly three-year high of 56.7 in May — firms themselves wary of pushing prices higher
- Geopolitical uncertainty — including the months-long Strait of Hormuz closure — resurfaced as a headwind, though some shipping has resumed following an interim U.S.-Iran peace deal
- Canada carries one of the highest food inflation rates among G7 countries; Prime Minister Mark Carney has pledged more than $1-billion to promote competition among grocers and food processors
- Manufacturing diverged from services: S&P Global's Canada Manufacturing PMI edged up to 53.0 from 52.9 as production and employment rose, while the Composite PMI fell to 47.9 from 50.8
Why it matters: Services dominate Canada's economy, so a sub-50 print (47.1) combined with weakest business confidence since November and sticky G7-high food inflation signals cooling demand heading into Q3. The split between contracting services and expanding manufacturing (53.0) shows the drag is sector-specific — not a broad-based slump — but the Strait of Hormuz closure has already fed through to global inflation, leaving Carney's $1-billion grocery competition pledge as a direct policy response.
