CANADA: PMIs Point To Summer Activity Pickup Being Only Transitory

Canadian Services PMI pulled back in September to a 3-month low 46.3, from 48.6 prior.

• The S&P Global report notes: "Activity continued to fall, whilst spare capacity and a lack of new business led to a decline in employment. Cost pressures also remained present, amid reports of higher labour and fuel expenses. However, selling prices rose only modestly as weak demand and some discounting restricted inflation. Confidence in the future was more positive, amid hopes of a more stable macroeconomic environment. But given the unsettled present business climate, the outlook remained unusually uncertain."
• In particular, "A lack of incoming new business was the primary factor pushing down on activity levels, with latest anecdotal evidence pointing to an uncertain business environment characterised by instability and uncertainty both at home and abroad (new export business continued to fall sharply in September). That said, the degree to which overall new work declined was modest."
• Future sentiment was the major bright spot: "firms are expecting growth in the year ahead, with sentiment improving in September to its highest level since October 2024."
• But as for the present: with the Manufacturing PMI indicator also showing a retracement (47.7 from 48.3), the Composite fell to 46.3 from 48.4 prior for a 3-month low. While the correlation with monthly GDP is not particularly strong, the overall trend in both is to slowing growth in both PMI and aggregate activity, with the sustainability in the late summer improvement (GDP by industry rose 0.2% M/M in July) looking doubtful.