TORONTO, Nov 5 (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.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama )