Services activity declined, with the PMI at 47.2 (below 50 = contraction), though slightly improved from February at 46.5New business fell again, but the pace of decline eased to a 5-month lowGeopolitical uncertainty (Middle East war) weighed heavily on demand, with clients delaying or pausing projectsInput costs surged to a 9-month high, driven by fuel, transport, and labor costsFirms raised prices, but pricing power was limited due to weak demand and competitionEmployment declined for a 7th straight month, as firms cut staff or didn’t replace workersBusiness Services and Transport sectors saw the sharpest drops in activityDespite current weakness, confidence improved to a 6-month high, with hopes for geopolitical resolution and stronger demand aheadBottom line: The sector remains in contraction, pressured by war-driven uncertainty and rising costs, but there are early signs of stabilization and improved sentiment.Paul Smith, Economics Director at S&P Global MarketIntelligence, said:“Another challenging month for Canada’s service sectorwas signalled during March, with activity and newbusiness again falling, albeit at slower rates comparedto recent months. The impact of the war in the MiddleEast has led to heightened uncertainty and delayeddecision making amongst clients, although firms areconfident that a swift resolution would lead to an upliftin activity.“Nonetheless, the present business environmentis clearly challenging, with firms reporting a steepincrease in their operating expenses over the month,driven mainly by increased fuel and transportationcosts. However, given subdued market demand,firms’ own pricing power remains restricted leadingto only partial pass through of higher costs to clientsand therefore a squeeze in margins. Understandablytherefore service providers took the option to save onexpenses wherever possible, with any leavers generallynot replaced leading to another net fall in employmentover the month. This article was written by Greg Michalowski at investinglive.com.