Canada's services PMI rises to 19-month high in November

By Fergal Smith

TORONTO (Reuters) - Canada's services economy expanded for a second straight month in November as firms added staff, but incoming new work was subdued and the threat of U.S. tariffs could yet hurt sentiment, S&P Global's Canada services PMI data showed on Wednesday.

The headline business activity index rose to 51.2 from 50.4 in October, posting its highest level since April 2023. A reading above 50 shows expansion in the sector.

"November proved to be a relatively positive month for the Canadian service sector," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

"However, the upturn was limited to some extent by almost no growth in new business volumes, and firms remain concerned over the underlying strength of business conditions despite the stimulative impact on economic activity of lower interest rates."

The employment index rose to a 14-month high of 51.4 from 50.7 in October, while the new business measure was at 50.1, down from 50.5, held back by a steeper decline in new export business.

The Bank of Canada has cut its benchmark interest rate by one and a quarter percentage points since June, lowering borrowing costs to 3.75%. Investors expect further easing at a policy decision on Dec. 11.

"It's worth noting that the latest survey took place before U.S. President-elect Trump's announcement of changes to U.S. trade policy in 2025. Although the scope and nature of tariffs on Canadian goods and services remains uncertain at this stage, already fragile confidence and economic growth is likely to be hit again in the coming months," Smith said.

U.S. President-elect Donald Trump has pledged to impose a 25% tariff on imports from Canada and Mexico. Canada sends about 75% of its exports to the United States.

The S&P Global Canada Composite PMI Output Index, which captures manufacturing as well as service sector activity, rose to 51.5 last month from 50.7 in October, its highest level since May 2022.

Data on Monday showed that Canada's manufacturing PMI rose to a 21-month high of 52.0 in November.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)