By Ovunc Kutlu
ISTANBUL (AA) - Canada's services economy experienced an increase in activity during the month of May for the first time in a year, global data provider S&P Global said Wednesday in a report.
The Services Business Activity Index increased 1.8 points to 51.1 in May, up from the contraction territory of 49.3 in April. While a reading above 50 indicates expansion, below 50 shows contraction.
The modest expansion of business activity was linked primarily to a similar sized increase in new work, which was the first gain since July 2023, according to the report.
Cost pressures, however remained significant amid reports of higher salaries being awarded among firms, while employment increased for the second consecutive month, it added.
"Looking ahead to the coming 12 months, service providers remain confident on average that growth will be sustained," it said.
Paul Smith, an economics director at S&P Global Market Intelligence, said new business increased in May and companies were encouraged to take on additional staff for a third time this year.
"However, higher employment led to an increase in typical labour costs, and this was a key factor behind another steep rise in overall operating expenses," he said.
"Although firms are broadly expecting interest rates to be cut and inflation to keep falling, signs of some tightness in the labour market leads to some concern that sticky price pressures may persist in the medium-term," he added.
The Bank of Canada announced Wednesday that it had reduced the policy rate by 25 basis points, its first rate cut since March 2020 when it lowered the policy rate 25 basis points in response to the economic conditions caused by the coronavirus pandemic.