Canada's services economy contracted for a fifth straight month in October as trade uncertainty and rising prices weighed on activity, according to S&P Global's purchasing managers' index data.
The headline business activity index edged lower to 48.1 last month from 48.3 in September, extending a string of sub-50 readings since June. A reading below 50 indicates contraction in the sector.
"The performance of Canada's service sector remained subdued in October," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement. "Ongoing economic uncertainty, linked to the Canada-U.S. trading relationship and rising prices, continued to undermine demand and confidence."
The new business index dipped to 48.0 from 48.5 in September as new export business posted the steepest decline since November 2025.
Canada and the United States have slapped billions of dollars in tariffs on each other in recent months. The U.S. is the destination for about 70 per cent of Canada's exports.
"Inflation remains raised and continued to be driven higher by fuel surcharges, rising transportation costs and tariffs, but efforts to pass these on to clients was again limited by a weak demand environment," Smith said.
The input prices index rose to a three-month high of 63.9 from 62.2 in September, while the prices charged measure was unchanged on the month at 53.4.
Sentiment remained historically subdued, S&P Global said. The future activity index fell to 57.7 from 61.4 in September.
The S&P Global Canada Composite Purchasing Managers' Index, which combines services and manufacturing sector data, declined to 48.1 in October from 48.7 in September, remaining below the 50 no-change mark for a fifth month in a row.
Data on Monday showed that the S&P Global Canada Manufacturing Purchasing Managers' Index declined to 49.6 last month from 51.5 in September, marking the first move below the 50 threshold this year.
The latest data comes as Canadian manufacturers have expressed encouragement over renewed trade talks between Canada and the U.S.
Other major economies also saw mixed results in their services sectors in October.
Germany's services sector expanded for a second straight month, but at a slower pace as new business fell. The S&P Global Germany Services PMI Business Activity Index fell to 52.5 from 52.9 in September but held well above the 50-point mark.
"The recovery in the service sector hit a speed bump in October, with the latest PMI survey signalling a loss of momentum as firms recorded a slight softening of demand," said Phil Smith, economics associate director at S&P Global Market Intelligence.
Australia's service sector contracted in October, marking the first decline in activity since May. The seasonally adjusted S&P Global Australia Services PMI Business Activity Index fell to 48.5 from 51.9 in September.
For Australian service providers, inflationary pressures intensified as both input costs and output charges increased at a brisker pace at the start of the fourth quarter.
The output price inflation and escalation of cost pressures in October "does not bode well for demand growth in the near term," said Jingyi Pan, economics associate director at S&P Global Market Intelligence.
This story was written by the e2gold.ca newsroom from reporting by The Globe and Mail, Global Banking & Finance Review, Yahoo News and AOL.com. Quotes are checked word for word against that reporting.