Data from S&P Global showed that private business activity in Canada shrank for a fourth consecutive month in February. Still, the contraction was at a slightly slower pace than in January. Business activity has come under pressure amid ongoing trade disruptions with the US. So much uncertainty is weighing on consumer and business confidence in Canada. That includes elevated geopolitical tensions in the Middle East, which are impacting energy markets and could push inflationary pressures higher.

• The S&P Global Canada Composite Purchasing Managers Index rose to 47.1 in February from 46.4 in January. A reading below 50 denotes a contraction. February marked the fourth consecutive month business activity contracted.
• February’s fall in business activity was driven by a contraction in services sector activity. Services sector activity also contracted for a fourth straight month, hindered by weak demand, which weighed on hiring. Employment within the sector shrank over the month.
• Earlier this week, it was reported that manufacturing activity expanded for a second straight month in February, boosted by higher new orders.
• South of the border, conditions were different for the US services sector. The ISM Services Purchasing Managers Index rose to 56.1 in February, which was its largest expansion since August 2022.

Despite showing its resiliency, Canada’s economy is feeling the pressure from trade tensions with the US. Uncertainty has picked up in recent days given the heightened tensions in the Middle East. The conflict in the region has raised fears of an energy crisis. However, a policy analyst at the MEI think-tank said this conflict is generating more interest in Canadian energy products from our trading partners, including Europe and Asia, which could be beneficial for Canada’s economy.

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