TORONTO, Sept 5 (Reuters) - Canada's services economy contracted for a third straight month in August as firms employed less workers and wildfires contributed to a slowdown in new business, S&P Global Canada services PMI data showed on Thursday.
The headline business activity index edged up to 47.8 from 47.3 in July, but was holding well below the 50 no-change threshold, signaling reduced activity.
"The performance of Canada's services economy remained subdued in August, with concurrent solid declines in both activity and new business signalled by the survey," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
"Firms bemoaned slow market conditions and a general lack of demand, with some also commenting that wildfires were having a negative impact on their businesses."
The new business index fell to a six-month low of 47.6, down from 49.2 in July, while the measure of employment dropped below 50 for the first time since last December.
Hundreds of wildfires have ravaged the western provinces of Alberta and British Columbia in recent months, threatening critical infrastructure and forcing the evacuation of a number of communities.
"Companies were also subdued when assessing the outlook, signalling concerns that borrowing costs will remain too high, despite expectations of rate cuts in the coming months," Smith said.
The Bank of Canada on Wednesday cut its benchmark interest rate for a third time since June, lowering the rate by 25 basis points to 4.25%.
The S&P Global Canada Composite PMI Output Index, which captures manufacturing as well as service sector activity, rose to 47.8 last month from 47.0 in July, marking its highest level since May.
U.S. stocks closed mostly lower in choppy trading on Wednesday, following data that showed more weakness in the U.S. labor market.
Data on Tuesday showed Canada's manufacturing PMI came in at 49.5 in August, up from 47.8 in July.
Reporting by Fergal Smith; Editing by Paul Simao
