In May, the Canadian service sector experienced moderate growth amidst rising economic unease due to the ongoing Middle East conflict. Fuel price hikes triggered a significant surge in operational expenses, reaching an 18-month peak according to S&P Global's latest Canada services PMI report released on Wednesday.
Business activity surged to a new high, with the index reaching 50.6 in May, up from 49.2 in April, marking its first move above the crucial 50 threshold since October and surpassing November's level of 50.6. This reading signals an expansion in business activity nationwide.
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Uncertainty surrounding global events has led to a cautious approach from clients, resulting in only a slight decline in new business for companies.
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Business activity declined with a reading of 49.8 in April, marking a decrease from the previous month's 50.3. Employment levels also dipped to 49.2, a drop from 50.7.
Firms are grappling with escalating costs, driven by a sharp increase in fuel prices and mounting wage expenses. This trend is likely to set off alarm bells among policymakers, who will closely monitor the potential ripple effect on inflation.
High oil prices could prompt the Bank of Canada to implement multiple interest rate increases to combat rising inflationary pressures.
Input prices surged to a new peak of 67.0 in May 2022, surpassing the previous high of 60.9. The prices charged by businesses reached an all-time high of 56.7 in July 2023.
Canada's service sector PMI reached a new 18-month high of 50.8 in May, surpassing its previous reading of 49.9 in April.
Monday's data revealed a slight dip in the S&P Global Canada Manufacturing PMI, which dropped to 52.9 in May, down from 53.3 in April, amid concerns over supply chain disruptions and rising costs.
The Bank of Canada could prompt the Bank of Canada to implement multiple interest rate increases to combat rising inflationary pressures.
