(Corrects headline to show PMI rises in May, not April)
By Fergal Smith
TORONTO (Reuters) -The downturn in Canada’s services economy eased somewhat in May as firms grew more hopeful that trade and political uncertainty would become less of a drag on activity over the coming 12 months, S&P Global’s Canada services PMI data showed on Wednesday.
The headline Business Activity Index was at 45.6 last month, its highest level since February and up from 41.5 in April. Still, it remained well below the 50.0 no-change mark that separates growth from contraction.
“Canada’s service sector continued to struggle in the face of ongoing tariff and residual political uncertainty during May, with activity and new business volumes again declining markedly,” Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
“That said, there are some hopes of greater stability in the year ahead, with confidence improving since April and helping to support some marginal employment growth as firms look ahead to higher workloads in the months ahead.”
The measure of employment rose to 50.3 from 47.9 in April, showing job increases for the first time since December, while the Future Activity Index was at 58.9, up from 56.4.
Canadian Prime Minister Mark Carney’s Liberal Party retained power in April’s parliamentary elections, promising sweeping changes to Canada’s economy.
The nation sends about 75% of its exports to the United States, including autos, steel and aluminum which have been hit with hefty U.S. duties. On Friday, U.S. President Donald Trump said he plans to increase steel and aluminum tariffs to 50% from 25%.
Tariffs were reported to have raised the price of some products, contributing to cost pressures that firms attempted to pass on to clients, S&P Global said.
The prices charged measure rose to its highest level in one year at 54.6, up from 48.0 in April.
The S&P Global Canada Composite PMI Output Index was at 45.5 last month, recovering some ground after it hit 41.7 in April, its lowest level since June 2020.
Data on Monday showed a slower pace of decline for manufacturing activity in May. The S&P Global Canada Manufacturing PMI edged up to 46.1 from 45.3 in April.
(Reporting by Fergal Smith; Editing by Chizu Nomiyama)
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