Canada’s service economy is slipping deeper into contraction. The latest S&P Global PMI data for June 2025 shows a sharp drop in activity, with the index falling to 44.3 from 45.6 in May. That marks seven straight months below the 50-point threshold. New orders declined again. Export demand collapsed. Business sentiment weakened. Labor costs surged. The broader economic picture is softening, and Canada’s leverage in trade negotiations is fading.
International sales dropped hard. Canada sends roughly 75% of its exports to the United States. That pipeline is now clogged with tariff uncertainty. Steel, aluminum, and auto components are facing new duties. The U.S. trade posture is shifting fast, and Canada’s service sector is feeling the pressure. Firms reported subdued client demand and difficulty forecasting future business. The Future Activity Index fell to 54.9, its lowest since March.
Operating costs jumped. Input price inflation hit its highest level since October 2022. The Input Prices Index rose to 62.7. Businesses responded by raising selling prices at the fastest pace in over a year. The Prices Charged Index climbed to 55.1. That’s not a sign of strength. It’s a defensive move to protect margins. Most of the hiring was part-time. Companies are hedging against long-term commitments.
The composite PMI, which includes both manufacturing and services, dropped to 44.0 in June. That’s a clear signal of private sector contraction. Manufacturing is also in trouble. The PMI for that sector fell to 45.6. Construction output is down. Retail foot traffic is thinning. The economy is not collapsing, but it’s losing altitude.
Canada’s negotiating position on tariffs is weak. The country has the lowest U.S. tariff rate among major partners, but that status is fragile. A 90-day pause on reciprocal tariffs ends this month. Ottawa is trying to hold the line, but the numbers aren’t helping. Business confidence is soft. Export volumes are shrinking. Labor costs are rising. The service sector is not built for this kind of pressure.
Sources:
https://fintel.io/news/canada-services-slump-deepens-in-june-on-trade-concerns-6000
.jpg?1706287068 "Tucker Carlson’s arrival in Canada sparks Liberal meltdown")