By Fergal Smith
TORONTO, July 6 (Reuters) – Canada’s services economy contracted in June as geopolitical uncertainty and elevated prices dampened demand, S&P Global’s Canada services PMI data showed on Monday.
The headline Business Activity Index fell to 47.1 last month from 50.6 in May, marking the lowest level since February. A reading below 50 shows a contraction in activity.
“Canada’s service sector returned to contraction territory during June as worries related to geopolitics and government policies resurfaced, weighing heavily on activity and sales,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
The new business index was at 47.5, down from 49.8 in May, and confidence in the outlook dropped to its lowest level since November.
Some shipping has resumed through the Strait of Hormuz following an interim peace deal between the U.S. and Iran, but the months-long closure of the vital global supply route for oil and liquefied natural gas has lifted inflation globally.
Canada has one of the highest food inflation rates among Group of Seven countries. Prime Minister Mark Carney has pledged to invest more than C$1 billion ($704.23 million) to promote competition among grocers and food processors.
“High selling prices were also noted as being a drag on sales, something that firms themselves were wary of, serving as a check on their pricing power,” Smith said.
The prices charged index pulled back to 54.5 after posting in May a nearly three-year high of 56.7.
The S&P Global Canada Composite PMI fell to 47.9 last month from 50.8 in May, weighed by the decline in service sector activity.
Data on Thursday showed that the S&P Global Canada Manufacturing PMI edged up to 53.0 from 52.9 in May as production and employment rose.
($1 = 1.4200 Canadian dollars)
(Reporting by Fergal Smith; Editing by Paul Simao)
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