Canada's services PMI shows sector contracting further in December

By Fergal Smith

TORONTO, Jan 6 (Reuters) - Canada's services economy remained in contraction in December as trade uncertainty weighed on employment and client spending, S&P Global's Canada services PMI data showed on Tuesday. The headline Business Activity Index rose to 46.5 last ?month from 44.3 in November but remained below the 50 no-change mark. With the exception of ?October, the index has posted a reading below 50 each month since ?December 2024.

"Canada's services economy struggled again in December ?amid ongoing reports by ?service providers of a challenging market environment, characterised by ongoing uncertainty and a reluctance to spend ?amongst clients," Paul Smith, economics director at ?S&P Global Market Intelligence, said in a statement.

"Latest data rounded off a difficult year overall as the spillover ?impact on confidence and activity from ?tariffs ?and trade policies weighed heavily on the economy," Smith said. "This has recently led to an increasingly soft labour market, with December data showing ?a fourth successive monthly cut in employment as firms sought to maintain lean operations in the face of the testing business climate."

Talks have broken down on a trade deal in key sectors between the U.S. and Canada, while the United States-Mexico-Canada Agreement, which has shielded much ?of Canada's exports ?from U.S. tariffs, is up for joint review this year.

The employment index was at 47.7, up from 47.1 in November, while ?the new business measure posted its 13th straight month of contraction.

Some firms were hopeful that upcoming sporting events like the FIFA World Cup would support growth in 2026 but sentiment remained well below its historical trend, S&P Global said.

The will be held in the United States, Canada and Mexico from June 11 to ?July 19.

The S&P Global Canada Composite PMI Output Index rose to 46.7 last month from 44.9 in November. Data on Friday showed that Canada's manufacturing sector contracted in December for ?an 11th straight month. (Reporting by Fergal Smith; Editing by Chizu Nomiyama )