TORONTO, Feb 5 (Reuters) - Canada's services sector weakened for the second consecutive month in January due to uncertainty stemming from U.S. trade tariffs, despite lower borrowing costs, according to S&P Global's Canada Services PMI data released on Wednesday.
The Business Activity Index headline rose to 49.0 in January from 48.2 in December but remained below the 50.0 mark, indicating contraction. "Panellists continued to note soft underlying market demand, with uncertainty affecting business decisions," said Paul Smith, Director of Economics at S&P Global Market Intelligence.
"While businesses seek to leverage lower interest rates to fuel growth, concerns over tariffs have kept confidence levels among panellists significantly below average."
President Donald Trump agreed on Monday to a 30-day halt in exchange for concessions on border and crime enforcement with neighboring countries.
In an effort to bolster the economy, the central bank cut its benchmark interest rate by an additional 25 basis points to 3% last Wednesday.
The New Business Index remained below 50 for a second consecutive month, and employment figures dropped into contraction territory for the first time since September.
Although the future activity indicator rose to 60.9 in January from 60.1 in December, it was lower than the 64.4 average since inception in December 2017.
The S&P Global Canada Composite PMI Output Index inched up to 49.5 in January from 49.0 in December, constrained by the decline in the service industry.
Data released on Monday indicated a drop to 51.6 in January from 52.2 in December.