Services Slide to a Six-Month Low as Clients Hold Their Signatures

In June, this journal reported that Canada's services sector had returned to growth, with the S&P Global Canada Services PMI reaching 50.6 in May after seven months of contraction. The recovery did not last. The index has now spent three consecutive months below the 50.0 threshold, and in August it fell to 46.8 from 49.1 in July. That is its lowest reading since February and the sharpest contraction in six months.

The contract drought

The figure that matters most to the staffing industry is new business. The new business index fell to 46.1 from 48.4, its weakest level since January. Paul Smith, economics director at S&P Global Market Intelligence, attributed the decline to persistent uncertainty that left clients unwilling to commit to new contracts, pointing to escalating trade tensions with the United States and the ongoing conflict in the Middle East.

Anyone who sells professional services will recognize the pattern. When clients hesitate to commit, the effects surface first as longer sales cycles, deferred projects and statements of work that sit unsigned. Staffing firms serving professional, technical and business services feel that hesitation directly, because their revenue depends on the same client decisions.

According to S&P Global, tariffs, trade friction and volatile international energy prices weighed on demand from domestic and foreign clients alike. New export business kept falling at a solid pace in August, though somewhat more slowly than before.

Confidence at a one-year low

Expectations deteriorated alongside current activity. The future activity index slipped to 56.4 from 57.5, its lowest level since June 2025, and Smith noted that firms increasingly saw rising prices as a threat to future performance.

Those expectations were recorded as trade tensions escalated through the month. On August 22, after negotiations collapsed, Washington imposed 50 per cent tariffs on a range of Canadian goods. Canada's counter-tariffs followed on September 8.

A margin squeeze in the making

Pricing dynamics add another layer of pressure. Input cost inflation dipped from July but remained elevated and above trend, underpinned by higher energy prices. At the same time, subdued and highly competitive demand limited service providers' ability to raise their own selling prices.

For staffing firms, that combination is a warning about the next round of rate negotiations. Clients absorbing costs they cannot pass on will look for savings across their supplier base, and contingent labour spend is among the most visible and adjustable line items on the ledger. Firms should expect pushback on markups and closer scrutiny of bill rates, especially in business services.