By Fergal Smith

TORONTO, Dec 3 (Reuters) - Canada's services economy contracted in November at the steepest pace in five months as economic uncertainty led to declines for employment and new business, S&P Global's Canada services PMI data showed on Wednesday.

The headline Business Activity Index fell to 44.3 last month from 50.5 in October, posting its lowest level since June. A reading below 50 shows contraction in the sector.

“Latest PMI data provided a sobering overview of Canada’s services economy as 2025 nears its end," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.

"Output and new business volumes deteriorated considerably, adding further to an already elevated level of spare capacity in the sector. Firms widely reported that clients were unwilling to commit to new work given considerable uncertainty in the outlook."

The new business index declined to 45.0 from 48.8 in October and the employment measure was at 47.1, its lowest level since June 2020.

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.

“Cost pressures also remained elevated, in part driven by tariffs, but also higher wage expenses," Smith said, adding that competitive pressures meant that firms were unable to pass on higher operating costs to clients.

The input prices index was at 60.1, down from 61.0 in October, while the prices charged measure declined to a seven-month low of 50.6.

The S&P Global Canada Composite PMI Output Index fell to 44.9 last month from 50.3 in October, marking its lowest level since June.

Data on Monday showed that Canada's manufacturing sector contracted at a steeper pace in November as trade uncertainty continued to hold back output and new orders.

(Reporting by Fergal Smith; Editing by Chizu Nomiyama )

((fergal.smith@thomsonreuters.com; +1 647 480 7446))