TORONTO (Reuters) -Canada's services economy expanded in October for the first time in 11 months as businesses showed signs of adjusting to economic uncertainty, S&P Global's Canada services PMI data showed on Wednesday.

The headline Business Activity Index rose to 50.5 last month from 46.3 in September, posting its first move above the 50 threshold since November last year. A reading above 50 shows expansion in the sector.

The data offered "some evidence of a stabilisation in the business environment," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

"Whilst welcome, growth realistically failed to make up for the sustained period of contraction seen through much of 2025 and should be viewed in the context of the continued uncertainty and client hesitancy that still plagues market demand."

The new business index was in contraction for an 11th straight month even as it improved to 48.8 from 48.1 in September.

Canada sends about 75% of its exports to the United States so its economy has been badly hurt by the U.S.-led trade war.

The first federal budget under Prime Minister Mark Carney was presented on Tuesday.

"Political and economic uncertainty, especially in relation to trade policies, also continues to dominate the outlook with confidence amongst firms remaining sub-par in October," Smith said. "That helped to explain why companies were again reluctant to replace any leavers, especially given evidence of continued spare capacity in the sector."

The employment measure was at 48.5, down from 48.9 in September and the future activity index slipped to 60.8 from 62.2.

The S&P Global Canada Composite PMI Output Index rose to 50.3 last month from 46.3 in September, marking its highest level since November 2024.

Data on Monday showed that the downturn in Canada's manufacturing sector eased in October as output and new orders declined at a slower pace. The S&P Global Canada Manufacturing PMI rose to 49.6 last month from 47.7 in September, posting its highest level since January.