Canada services PMI climbs to 10-month high in April

By Fergal Smith

(Reuters) - Canada's services sector contracted at a slower pace in April as firms notched some unexpected sales and added workers, but increased wages led to inflation pressures heating up, S&P Global Canada services PMI data showed on Friday.

The headline business activity index rose to 49.3 from 46.4 in March, posting its highest level since June last year.

A reading below 50 indicates contraction in the sector, with the index stuck below that threshold for 11 straight months, the longest such stretch in three years.

"Another fall in activity during April reinforced the general underlying weakness that pervades the Canadian services economy," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement. "But there was some positivity to be found in the survey data."

The new business index rose to 50.0 from 48.3 in March, ending an eight-month run of falling sales, while the measure of employment increased to 50.6 from 50.0 as extra staff were taken on to help develop new projects or to support sales activities.

"Inflation rates remain too high ... Costs are in part being driven up by higher salary demands, whilst firms are raising their own charges at a faster rate," Smith said.

The prices charged sub-index rose to a nine-month high of 56.3 from 54.7 in March and the measure of input prices was at 60.3, easing only slightly from 61.0. Firms said that the recent increase in the carbon tax had raised fuel costs.

The S&P Global Canada Composite PMI Output Index, which captures manufacturing as well as service sector activity, rose to a 10-month high at 49.3, up from 47.0 in March.

Data on Wednesday showed that the manufacturing PMI edged lower to 49.4 last month.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama)