Canada's services PMI approaches a turning point: new orders are recovering but cost pressures are mounting—how should small business owners respond?

May 5, 2026, S&P; S&P Global released Canada's April services PMI data. In a nutshell: the bad news isn't as bad, but the good news isn't great either. The services business activity index rose from 47.2 in March to 49.2, staying below the 50 boom-bust line for the sixth consecutive month—but very close to a turning point. Meanwhile, manufacturing PMI surged from 50.0 to 53.3, the fastest expansion in nearly four years.

For Chinese business owners operating service industries in Canada, this number has two meanings: first, customer demand is indeed recovering (new business index at 50.3, breaking 50 for the first time since November 2024); second, your costs are still rising (price charge index at 55.6, a two-year high), and your peers are passing those costs on to customers.

What is PMI and why should small business owners care?

PMI stands for Purchasing Managers' Index, compiled by S&P; Global surveys purchasing managers at private companies each month. 50 is the breakeven point: above 50 means the industry is expanding, below 50 means it's contracting. It's important because it comes out a month or two before GDP data, making it the fastest signal for business owners to gauge economic direction.

The signals from April's data are subtle: the services sector is still contracting, but the pace is slowing; manufacturing is already expanding, and at a fast rate. The composite PMI output index hit 49.9—just 0.1 away from 50. In other words, the Canadian economy as a whole is standing on the threshold of expansion.

Who is recovering? Who is still struggling?

Indicator	April	3 months	Change	Signal
New Business Index	50.3	47.7	+2.6	New orders are starting to grow, customers are coming back
Business Confidence	Up to 18 months	-	-	Business owners are more optimistic about next year
Manufacturing PMI	53.3	50.0	+3.3	Factories Are Accelerating Production, Inventory Behavior Is Obvious
Composite PMI	49.9	47.6	+2.3	Just 0.1 away from expansion—turning point ahead
Price & Fee Index	55.6	54.4	+1.2	Businesses collectively raising prices, increasing inflationary pressure
Input Costs	has declined somewhat	up to 9 months	-	Oil prices and tariffs still push costs up, but pace slows

What Do Economists Say?

S&P; Paul Smith, Director of Economics at Global Market Intelligence, made an interesting remark in the data release statement: 'Although Canada's services sector continued to contract in April, the decline was minimal. And given the backdrop of tariffs and the Middle East conflict, overall performance wasn't actually that bad.'

He also noted that business confidence has hit an 18-month high, with many businesses believing government measures to support economic growth will have a positive impact in the coming year. The government measures refer to the billions of dollars Prime Minister Carney pledged in last week's fiscal update—for new skilled worker programs and infrastructure construction.

In other words: business owners see the government spending, so they're optimistic about next year.

Prices are rising—fastest increase in two years

The price charge index surged to 55.6, a two-year high. What does this mean? It means that gas station price hikes and rising import costs due to tariffs are being passed on by business owners to end customers. S&P; Global's exact words: "Faced with higher costs, many businesses choose to raise their own selling prices."

For Chinese business owners in the service industry—restaurants, retail stores, beauty salons, accounting firms—this is a signal you can't ignore. If your suppliers are raising prices, your costs are going up. If you don't raise yours, your margins shrink; if you do, customers may spend less.

Manufacturing expansion (PMI 53.3) is also price-driven. The Iran war pushed up oil prices, leading to stockpiling behavior—businesses buying raw materials in bulk before price hikes, further boosting demand.

Can government spending help you?

The Carney government released a fiscal update last week, committing billions of dollars to skilled worker training and infrastructure investment. For business owners, this means two things:

• Increase in Government Procurement Orders—Infrastructure projects need suppliers, from building materials to engineering services
• Hiring may become easier—Skills training programs aim to expand the labor supply, which can help ease hiring cost pressures over the long term.

But government spending takes time to flow through. In the short term, if the service sector is still contracting and costs are still rising, the most practical response is to open up financing channels first.

The economy is at a turning point—is your funding ready?

Composite PMI at 49.9, just 0.1 below the expansion line. Economic turning points often coincide with financing windows—banks are more willing to lend during early economic recovery, and government-guaranteed program approvals may also be faster.

For Chinese business owners considering expansion, equipment upgrades, or simply building a cash buffer, these options are worth exploring: CSBFP government-guaranteed loans up to $1.15 million, BDC small business loans, and various Ontario grant programs (like the Ontario Job Grant covering up to $10,000 per person for employee training).